Your 401k is losing money because investments fluctuate. From any given moment your balance will decrease or increase depending on the market conditions. The important thing to remember is that the long-term trend is going to be an increasing balance for two key reasons. You will (should) continue investing.
For 2024, eligible taxpayers can contribute $23,000 to their 401(k) account and that is up from $22,500 in 2023. The limit on catch-up contributions for 401(k) plans for 2024 is $7,500 — the same as it was in 2023, bringing the total elective deferral contribution limit to $30,500.
During an economic downturn, stock prices typically fall, which can lead to a decrease in the market value of the assets in your 401(k). This can result in a significant loss of retirement savings, especially for those nearing retirement.
Don't “panic sell” your investments
The stock market historically has bounced back from short-term declines, so pulling your investments could mean missing out on some of the market's best days. Staying invested is usually safer than trying to time the market. Selling is how you realize losses in your account.
Market downturns can make you feel like you're even more behind in your savings goals. “We believe the key thing to do is to keep your 401(k) funds invested. If you take them out of the market, you may lock in losses and could miss out on opportunities for market rebounds.”
Any money you contribute to your 401(k), such as money contributed via payroll deduction, is money you can't lose. That employer can't take that money from you, even if you leave the company entirely. But there is another portion of your retirement plan you may not be able to claim: your vested balance.
It's better to own broadly diversified mutual funds or index funds that track a broad basket of stocks, such as the S&P 500. The fixed-income portion of your portfolio, which consists of bonds, money markets, CDs, and other cash equivalents, will act as a downside buffer against a steep stock market decline.
Moving your retirement savings to ultra-conservative funds in fear of bear markets is rarely a good idea. Fund types like a money market fund or a stable value fund pro- vide minimal returns, and in most cases, inflation is greater than any return a fund of that caliber will be able to produce.
The Internal Revenue Service has issued proposed regulations addressing certain SECURE 2.0 Act provisions, including a provision generally requiring newly established 401(k) and 403(b) plans to automatically enroll eligible employees beginning with the 2025 plan year.
For 2025, the most you can contribute to a Roth 401(k), a traditional 401(k), or a combination of the two is $23,500. Those 50 and older could contribute an additional $7,500 in 2023 and 2024, and they can also do so in 2025. Those 60 to 63 can contribute an additional $11,250 in 2025 in place of the $7,500.
For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.
However, when an economic downturn or recession occurs, 401(k)s are not immune to the risks. Because holdings in these accounts are often largely tied to stocks, 401(k) losses can be steep if portfolios aren't structured in the best way.
While a 401(k) is a relatively safe place for your money, it's not immune to changes in the market. This type of plan isn't a savings account. Rather, it's an investment option that will grow and fall over time.
Should I Move my 401(k) to a Stable Value Fund? This depends on your risk tolerance, and how long you have until you retire. Stable value funds are ideal for investors nearing retirement. They are not designed for growth.
Invest in bonds: Invest in more bonds to protect your nest egg from a stock market crash. This asset type has a lower return rate but less associated risk. Because stocks are influenced by the market, they have a better chance of multiplying your money but are more vulnerable to price shifts.
Due to safeguards such as ERISA and SIPC, 401(k) plans have built-in layers of protection. A bank failure is unlikely to impact your retirement funds if they are held in separate accounts and managed by a reputable custodian or investment firm.
A 2024 recession is generally seen as unlikely, but metrics that economics take seriously hint that a recession could occur, perhaps in 2025.
“As a general rule, dipping into your retirement funds to cover a short-term need could end up costing you more in the long run,” says Walker. “If it's possible, I'd encourage you to consider other ways to access cash that could be more beneficial to your long- and short-term financial goals.”
If your 401(k) is losing money, consider how much time you have before you plan to retire. If you're closer to retirement, you may want to talk to a benefits manager or contact the brokerage to see if you can reallocate your portfolio so that it's invested in less risky stocks.
You must take your first required minimum distribution for the year in which you reach age 73. However, you can delay taking the first RMD until April 1 of the following year. If you reach age 73 in 2024, you must take your first RMD by April 1, 2025, and the second RMD by Dec. 31, 2025.
Bond funds, money market funds, index funds, stable value funds, and target-date funds are lower-risk options for your 401(k).
A senior fellow at the Manhattan Institute, she is author of “An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.” Everyone needs a nest egg. If you are among the 56% of US workers with a retirement plan, I have some bad news for you: Your 401(k) will be gone in 10 years, tops.
The average 401(k) balance rose to $107,700 by the third quarter of 2023, up 11% from the year before, according to the latest update from Fidelity Investments, one of the largest retirement plan providers in the nation.