What To Do When Your 401(k) Is Losing Money

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While contributing a portion of every paycheck toward your employer-sponsored 401(k) plan is undoubtedly a smart way to save for retirement, it can be quite concerning when you see your balance drop.

First, know that this situation is completely normal. The money in your 401(k) is invested in the market, meaning it’s exposed to everyday fluctuations and can both gain and lose value in accordance with stock market performance.

“As investors in mainstream publicly traded equities, you are likely gaining broad exposure through your 401(k) and there will be periods of time where you go through declines, as we have since markets started correcting in late 2021,” Austin Winsett, certified public accountant and financial advisor at Exencial Wealth Advisors, tells Select.

Although 401(k) balances can experience drops, the good news is most plans are designed to protect your funds against any large losses. They’re also naturally diversified, meaning your 401(k) money is invested in things like mutual funds, index funds, target-date funds and exchange-traded funds versus individual stocks, so your risk is more spread out.

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Here’s what to do when your 401(k) is losing money

Generally, the best move to make when you see your 401(k) balance go down is to do nothing at all.

This advice generally echoes investment experts’ guidance when any of your investments are affected by market downturns. Investing is a long-term game — you take the short-term dips in exchange for the potential long-term growth, which, history has shown us, is what happens. Though past performance does not predict future performance,…

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