Should you withdraw your 401k during the turbulent time in the stock market? The answer is no!
You might be looking at your 401k statement and panicking. Don’t panic. Don’t even look at that statement. Throw it out. When the stock market is is down like it is now, you should contribute MORE money to your 401k. Stock will be at an all-time low and you’ll be getting stocks at a steal. This is your time to take advantage of the low stock prices.
Believe me, I started to look at my 401k statement but then before I could really examine it, I tossed it. See, I’m a lower middle class guy. I don’t have millions of dollars invested in my 401k.
The people who are really going to take a hit from the stock market are the big guys who have millions in the stock market bought on margin. Margin trading is when you borrow money from a broker to buy stock in hopes it will go up. If you buy on margin and the stock drops there are two big losers. The big losers are the banks that loaned the investor the money to buy stocks and the investor who lost money on the the stock plunged. If the investor is unable to pay back the money that he was loaned that is a double whammy. This is one of the factors that may have contributed to the great depression. There were too many borrowers and nobody was able to pay back the loans they go to either invest in the market.
If you are middle class, like me, you don’t buy stocks on margin. Your 401k is managed by a brokerage firm. Their job is make the best deals to make your funds grow.
But you can do your part, increase the amount you contribute to your 401k. Sure the stock market might even drop further, when it does, contribute more to your 401k again. When the market increases and gets back on its feet, you’ll thank yourself.