June 23, 2020 - Douglas Myser

What to do with your 401(k). Most people lately have had a hard time figuring out what to do with their 401(k). Variations in the price of stocks, due to the Coronavirus outbreak, plus for a while the stock market picture wasn't exactly pretty, for a while. After stocks tumbled in March, you may have stopped looking at your account altogether. Because of those losses, the average 401(k) balance shrank to $91,400 in the first quarter of 2020, down 19% from the previous quarter, according to Fidelity. The good news, stocks have largely regained the steep losses from March. But the topsey turvy markets, and the fact that many employers are either cutting jobs, slashing pay or cutting the contributions they make to employees 401(k)s are all good reasons for savers to take anther look at their 401(k). What to do with your 401(k).

"Sometimes it takes a period of volatility like this to realize that a real plan has not been in place," said Matthias Giezendanner, a certified financial planner and founder of San Francisco Wealth Planning. Now is a good time to reassess your risk tolerance, contribution levels, allocation and, for those who are no longer working at the company contributions to the 401(k). Some employers are cutting their contributions to employee 401(k) plans as a way to conserve cash and potentially avoid layoffs. This includes 12% of companies that have suspended matching contributions already and 23% that are either planning to or considering doing so this year, according to a survey of companies employing 12 million workers by Willis Towers Watson.

"The key thing to keep in mind when this happens is that it is usually temporary," said Andy Mardock, certified financial planner at ViviFi Planning In Bend, Oregon. "If possible, increase your own savings rate to fill the void."  If you are experiencing financial hardship because of a pay cut or a layoff in your family, your cash flow may be tight and savings may be depleted.