Managing Retirement Savings in Volatile Markets

What should you do about big losses in retirement accounts?

The typical 401(k) account balance fell between 19 percent and 25 percent this year through mid-October, according to the Employee Benefit Research Institute.

Conventional wisdom suggests that you stay the course and not sell out of downtrodden investments, only to see them rebound when the economy recovers.

Selling out at the lows may not be the answer, but who knows where the bottom is in these turbulent financial times?

Historically, the stock market has served as a leading indicator of what's going on in the economy. The market declines presage a recession, but don't predict the length or severity of the economic downturn.

Not sure what to do? Below I address several issues relevant to all investors, regardless of age. In a separate article, I offer age-specific advice about managing your retirement investments in turbulent financial times, focusing on four life stages that span from early career to retirement.

1. Keep contributing
If you're still working, stopping contributions to your retirement account isn't the answer. This is especially true if your company matches all or part of your contributions to a 401(k) or 403(b) plan.

Companies commonly match 50 cents on the dollar for up to 6 percent of salary contributed to their plans. That gives you a 50 percent return on your money without any angst at all about markets or investing.

Even if your employer doesn't match your contributions, if you stop contributing, you stop working toward the goal of a financially secure retirement. You can dial down the risk in how you're invested if that's appropriate for your situation, but getting out of the habit of contributing creates its own set of problems down the road.