3 Steps to Take if Your 401(k) Starts Losing a Ton of Value

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.


  • Don't panic if your 401(k) starts losing value during a downturn -- it happens!
  • By spreading your money across different asset classes, you'll minimize your risk and give yourself a better chance of weathering any market downturns.

What should you do if your 401(k) takes a nosedive?

Watching your hard-earned retirement savings take a nosedive is a scary experience. Whether it's due to market fluctuations, bad investments, or other factors, seeing the value of your 401(k) plummet can cause significant stress and anxiety. Fortunately, there are steps you can take to protect yourself from further losses and put your retirement savings back on track.

1. Don't panic

The first thing to do when your 401(k) starts losing value is not to panic and sell off all of your investments at once. When markets are in a downturn, it's natural to worry about protecting what you have left. However, making rash decisions during this time could lead to even greater losses. It's important to take the time to understand why your investments are performing the way they are and consider how best to move forward before making any drastic moves.

The key is to not reduce or stop making regular mandatory contributions made by your employer, as those will still be getting invested in the market and can help balance out losses over time. Additionally, pay attention to other tax- advantaged accounts such as IRAs.

2. Diversify your portfolio

No one wants to see their 401(k) lose value, but it's important to remember that markets fluctuate and sometimes losses are inevitable. If you're seeing losses, check to make sure your investments are well diversified. This means evaluating how much money you have invested in each type of asset (stocks, bonds, cash, etc.) and ensuring that those amounts reflect your desired risk profile and goals.

If you find that some assets have lost more value than others, you may need to shift some money around in order to ensure that the overall risk level of your portfolio remains consistent with what you're comfortable with. By diversifying your portfolio, you can help protect yourself from market volatility and give yourself a better chance of weathering any market downturns.

3. Remember that you are invested for the long term

Although it may seem counterintuitive in light of recent market losses, this may be an ideal time for long-term investors to focus more heavily on stocks or mutual funds. Warren Buffett, considered the greatest investor in the modern era, states that investors should "be fearful when others are greedy and greedy only when others are fearful."

Investors are often driven by greed and fear. When others are fearful, they start selling, potentially depressing prices too much. This may present a good investment opportunity. While past performance isn't always indicative of future returns, investing during times when stock prices are low could yield better results over the long haul than if you were investing when stock prices were at their highest points. The key is to remain disciplined and patient through the ups and downs of the market.

When it comes to managing a 401(k) during volatile markets or tough economic times, it is important that you don't panic. Over the long run, the stock market has been one of the best places to invest and grow your money, so don't feel tempted to make hasty decisions based on fear or emotion alone! By following these steps outlined above -- such as remaining calm and diversifying when necessary -- investors should be able to weather any storm without sacrificing their long-term goal to be secure in retirement.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

Our Research Expert

Related Articles

View All Articles Learn More Link Arrow