- According to CNN Money, suspending contributions to a 401k plan, even in a tough economy, is rarely a good idea. When the market is down, your contributions are buying cheap investments. Over time, the value of these investments usually increases, which means you basically purchased at a bargain price.
CNN Money, however, says that stopping contributions during times of serious financial trouble, such as excessive medical bills, is sometimes unavoidable. If you must stop contributions, don't forget to start up contributions once financial conditions change. - Investors in their 20s should focus on a mix of stocks and bonds in their 401k portfolio, according to USA Today. Young investors have time on their side. If financial markets are difficult, they have years to recovery from loses. During your 20s, 80 percent of your 401k should be invested in stocks, according to USA Today.
- Even if you have large sums of money invested in the market, USA Today cautions against stopping contributions in your 30s and 40s.
Instead, consider exchange trade funds, which are safer in the long-term. Also, consider re-allocating contributes from stocks to money market options. That way, new contributions are more protected from market risk. Keep your portfolio diversified, with a good mix of investments. - Investors in their 50s and 60s shouldn't put a halt to contributions, according to USA Today. You can, however, change investment options to a more conservative approach, investing more heavily in bonds. Also, if you're starting to withdrawal from your 401k soon (reaching retirement age), consider waiting a little longer. This will provide more time to recover losses and add additional contributions.
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