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FINANCE

Is your 401(k) losing money? Here’s what you can do according to experts

The federal government encourages Americans through tax incentives to invest for their retirement. One vehicle is 401(k), but they are subject to market volatility.

Update:
Expert advice for if your 401(k) balance falls
Dado RuvicREUTERS

The federal government encourages Americans through tax incentives to invest for their retirement. One of the most popular methods is putting money away in a 401(k) plan through your employer. These have the benefit of the company matching a portion of the funds you put into your retirement nest egg.

Workers are given a choice of investment plans for their 401(k) fund. Depending on the type, the government gives you a tax break when you put your money in or when you take the money out during retirement.

However, how much and how fast it grows is dependent on the market. While the historical trend has been upward, markets can experience moments of volatility and that means it can go down, which could see your 401(k) taking a hit.

Is your 401(k) losing money? Here’s what you can do according to experts

The first thing financial experts will tell you is not to panic if you see the markets sliding. Those who have several years to go until they plan on or have to start tapping into their retirement fund will most likely see the markets rebound as they have time and again.

The situation may be more worrying for those who are at the cusp of withdrawing from the rat race.

Analyze the underlying causes of the losses

Either way, you will want to take time to analyze what is causing your 401(k) to lose value. Is the reason short-term or can you expect a further significant slide that will continue over the long run?

Get advice from multiple sources before you decide whether to cut and run or ride out the tempest. And don’t attempt to predict the market, even seasoned investors have a poor track record at guessing correctly.

Keeping abreast of the what’s happening in the markets and economy can help you when receiving advice so as to make informed decisions.

Diversification can help hedge your bets

If your portfolio is concentrated in only a one type of risk category or only a few investment groups, you may want to consider diversification. By spreading your investments across various asset classes and industries you can hedge against possible losses.

Regularly check the mix of you 401(k) and make adjustments as needed. And it never hurts to seek out professional advice from a financial advisor who can help you shape your investment strategy based on your own situation and goals.

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