A 401(k) plan allows United States workers to save for retirement. The greatest benefit of these retirement plans is deferred income tax. Until the money is withdrawn, it is not considered taxable income.
Since 401(k) plans are usually composed of money market investments, stocks, and bonds, there is some risk involved. In 2008, the stock market took a dive. Many hardworking Americans saw their retirement savings decreases, some at an alarming rate. If you were one of those individuals, you may wonder what to do. Should you change your investment strategy? Should you move your stocks around? Honestly, it all depends who you ask.
Turn on the television or the radio and listen to an “expert,” in the field of money management and investing. Some experts claim you should move your investments around while others say the stock market has nowhere to go but up. That will however, take time. By pulling out of your investments or making the switch from stocks to money market accounts or bonds, you lose money. Stocks are nearing all-time lows. You paid more than their current value. Pullout now and you lose money.
For most individuals, it is best to ride out the storm. As previously stated, many financial experts expect the economy and the stock market to bounce back.