“If you’ve suffered a loss in your 401k in the past year, you’re certainly not alone,” said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California, and a member of CNBC’s Advisory Board. .
“It’s important to remember that if you haven’t sold the investment, you don’t know the loss, and there is potential for recovery.”
It is reasonable to expect the portfolio will continue to increase in the next year, or even at the end of the year, she said.
How to bounce back from 401(k) losses
One of the important practices that every investor should do is to review their investment allocation at the beginning of the year, Sun said.
That means it’s a good time to check whether your allocation is still meeting your needs, he says. If you are not sure, consult a financial advisor to help you calculate your risk tolerance and investment time horizon and see if your investments still work for you.
Odds are, it’s probably not, Sun also added, and “rebalance, like a regular haircut, is required.”
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Even if one sector of the financial market is doing well, it may not continue. “So, if you’re heavily weighted in large-cap growth, for example, but less in international, it’s better to build a sustainable diversified portfolio.”
After a tumultuous year, many older Americans are concerned about their retirement security. Nearly half, or 48%, of American retirees believe they will live longer, a separate report by Clever Real Estate found.
“Everybody’s feeling financial pressure — there’s a lot of uncertainty in the markets and the economy,” said Mike Shamrell, Fidelity’s senior vice president.
However, “a lot of people know there will be ups and downs,” he said. “Don’t let short-term economic events derail your long-term retirement savings efforts.”
“If your time horizon is long, and you can afford it, try adding it when the market is down,” Sun said. “If you buy long-term quality investments, this will help you buy more stocks as the market goes down.”
To that end, try increasing your 401(k) contribution percentage this year, he said.
The average 401(k) contribution rate, including employer and employee contributions, is currently at 13.7%, just below Fidelity’s recommended savings rate of 15%.
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