Don’t Give Up On Your 401k

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If you are worried about your declining 401(k) balance, and you’re wondering if your portfolio can survive the current market decline, you may want to consider some of these options:

1. Re-balance your portfolio with a greater emphasis on bonds, especially if you’re currently 100% in stocks. If you can’t stand to see the daily ups and downs, move some of your assets into fixed-income investments (like bonds) to offer your portfolio some stability and income. However, avoid wholesale switches back and forth and don’t alter your asset allocation to less than 25% stocks.

2. Think about a later retirement. Delaying your retirement date by only one or two years can have a drastic effect on your portfolio’s value, allowing to to continue to grow. If you’re 40 years old and plan to retire at 55 with a portfolio currently valued at $300,000 (earning 8 percent) and you plan to withdraw $100,000 per year (that’s not much if you consider 3 percent inflation), you would conceivably run out of cash by age 73. But if you waited until age 57 to retire, those same funds would last until about 85, twelve years later.

3. Work part time. Many retirees find that the good life isn’t sitting by a pool, sipping pina coladas. Many become bored and start second careers or work part time to make extra money so that the amount they withdraw from their retirement portfolio isn’t as large. This small step can greatly extend the life of your 401(k) and possibly provide a higher income for you when you retire, not to mention the satisfaction of proving you still have what it takes to make things happen.

4. Reduce debt NOW. Every penny you can put toward debt now means less money you’ll have to withdraw to pay those bills later. Debt is a horrible drain on fixed incomes. Taking the necessary steps today to reduce it will pay many rich rewards when your retirement is on the horizon.

The main thing to remember is that volatility is not the same thing as risk. Volatility is riding a horse up and down the steep slopes of a Montana canyon. Risk is riding a three legged horse up and down the steep slopes of a Montana canyon…during a blizzard.

Stay the course. It isn’t always a straight road.

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