Don’t Give Up On Your 401k

by Ron Haynes

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.

[tags]401k, 401(k), 401-k, retirement, retirement planning, financial planning, stocks, bonds[/tags]

About the author

Ron Haynes has written 1001 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 4 comments }

Patrick

Great tips, Ron. I know my 401(k) and other investments have received a beating this year. I’m OK with that though. Since I invest straight from my paycheck, I end up buying more shares at the depressed prices. Now if this continues until I reach retirement age… well, then I’ll start worrying! ;)

Ron

#Patrick→
It still causes a little nervousness, but when you have a long term focus, you know it will correct. Looking back over the years, it’s easy to see the few downs and the many ups, but no one wants to EVER experience the downs!

Jeff@My Super-Charged Life

Like Patrick, I am investing for the long-term. I’m fortunate because still have 20 or 30 years until I reach retirement age. On the other hand, my dad is already retired and he is struggling a little because of the downturn in the stock market. He has had to get a part-time job as you suggest to help make ends meet. I guess it all depends on where you are at. Either way, these are some great suggestions.

Ron

#Jeff@My Super-Charged Life→
Thanks Jeff. I hate to hear that about your Dad. Hopefully the market will turn around soon.

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