Staying Put in My 401(k)

One of my good friends recently asked me if she should be investing in her 401(k) amid the market troubles. I recently illustrated this exact problem using an example from a financial adviser here. But I will also dedicate this whole post to why I myself am staying with my 401(k).

Even though I write about 401(k)s for a living, I am certainly not an expert on this topic, so if you want real advice you should definitely find it. Of course, most of us don't have financial advisers yet unless we are Paris Hilton, so your employer or provider should have info right now. However, I can tell you why Ellie Behling is staying put in her investments, with the help of advice I've gleaned from my research and my much more expert co-worker Fred.

I am looking forward to any comments/questions you might have.

Why I am Still in my 401(k), Even Though the Market Sucks

1. First of all, even though my portfoilio is down big time, I didn't really "lose money." It's not liquid assets to me. I mean, this is not money I go to the ATM and get out. This is money I specifically set aside from my paycheck each week to not see for 40 or 50 years! It is supposed to go up and down. (What's interesting is that we've had some trouble in America looking at our retirement accounts as untouchable, and it really injures our retirement savings. For instance, Congress introduced legislation to ban 401(k) debit cards to help this problem.)

2. Second of all, I am still benefiting from saving with my employer's match. Now, if somehow (and I guess this is possible), my contributions were equaling less money than they were to begin with, I might be a little wary. So what I'm saying is, I put in $1, my employer puts in $0.50, and I still have not ended up with less than $1 even as the markets nosedive. (I talk more about employer matches here.)

3. My assets are allocated nicely, and I shouldn't worry further about it. In fact, when Fred worked for a 401(k) provider, he used to tell employees not to look at their 401(k) more than once a year. Here's the part where any of you reading should pay attention: You should be diversified. Your money should be in a variety of different funds and/or assets (stocks, bonds, etc.). As far as types of assets, I personally am 100% in stocks, but some people my age might appreciate a more conservative portfolio that includes bonds. I am 23 years old, so I want an aggressive portfolio. I made sure I am investing in a zillion different stocks within my portfolio in order to not put all my eggs in one basket.

A lot of people our age are in target-date funds, which will do all of this diversification for you. I think there are pros and cons to having your own control. But I also know that it's probably better to just be saving at all.

4. Lastly, and this is the hardest part to grasp: When the markets are down, younger investors like us might actually be benefiting. This is a buyer's market. Within our 'k plan (as I like to call it), we are actually buying shares when they are super duper cheap. The market WILL go up again (I mean, I hope so...). So basically, younger investors and those thinking about investing will get a good deal by starting or staying in their 401(k) plan now. Because I hate to remind you ... but we have a lot longer to go before we can start drinking from our 401(k)egs.