We both still have 20 years until retirement. Based on advice from his pharmacist friend, he changed his 401k investments from moderate to safe, meaning bonds. I, on the other hand, have let it ride on moderate.

My question is this: On a 401k that is designed to be a “set-it and forget it” type of deal, was it wise to do what my brother did?

ETA: His 401k has only taken a 5k loss so far.

5K loss since this all started? If that’s the case he was  all bonds from the get-go.

If not, he‘a selling low, write an investing personal strategy and stick to it.

How much was your loss?    Don’t forget to subtract 8% for today.  That won’t be showing yet.   The actual value of your account is going to lag by at least two days.

The challenge is, He has to know when to buy back in.

Let it ride. I did this back in 2008 or so and just kept contributing. I do t know what I’m down as of date, it’s substantial. But I’m not sweating it and I keep buying.

It will come back.

Hold Fast!

Your brother just locked in a 33% loss and bought bonds which return 1-2% a year (less than inflation).

I'm putting off some minor upgrades to my house and trying to free up money anywhere I can to buy stocks.

"The time to buy is when there's blood in the streets." ~Baron Rothschild

On how many dollars did he take a 5K loss on?  10k? ...15K?

Just checked up on this thread. Ill ask my brother some more questions. Thanks for all of the responses.

My brother has taken a 17k loss, not 5k. I have taken a 20k loss.

He was at 135k. I was at 140k.

What should we do if we get laid off?? Leave it as is, or move to bonds?

I missed something.  You didn't sell so how did you lose money? Or you panicked and sold too?

I haven't even checked my stocks. Doesn't matter what their value is right now. It seems odd as hell to buy a long term investment but treat it as a short term one.

Like buying a car but panicking that it can't pull a gooseneck.

There’s just no easy answer, because no one knows where the market will go.

If you didn’t get out before the big drop, conventional wisdom says ride it out.

Good luck.  I hope you don’t get laid off.

We do actually.  It always goes up long term.  If you want to win,  bet the sure thing.

I didn’t sell. The total amount has just decreased with stock market losses.

Ill just let it be and hope I don’t lose my job.

Dude, give it up.  There are No sure things.  What is “Long Term?”
You don’t even know how long you’re going to live.  None of us do.

What a colossal idiot he is (no offense).

"So you're telling me that it's with almost certainty that my entire portfolio will recover its value within 5 years, but if I sell now because I'm scared i can make these losses permanent and not ever regain my losses?

Say no more! BRB gonna go sell all my stocks."

Seriously. If people are this dumb why are they even using financial instruments other than a mattress or bank?

Most plans allow for an almost unlimited number of reallocations.  Selling does not make any loss permanent, unless you never buy back in.
It’s sad that people don’t take the time to investigate how this stuff works.

No offense taken. I get it. Next question: What would you do if you lost your job? Just let it sit as is?

ETA: Before possibly losing my job I was also in the “Keep putting money in” camp, as I understand that the market will fluctuate. I am only thinking differently, as I may lose my job.

Well if you look at 1, 3, 5, 10, and 20 year periods,  the% of them that gain go up exponentially as you increase the term length.

I'm not giving up shit. Math and analytical thinking don't stop.  They don't end.  They exist forever.

I haven't heard a single person here articulate why they are selling. Just muh feels.  Or "well you don't know what'll happen". You guys do what you want.  If you like losing money then go ahead.

No loss has taken place then.  Do you worry about the changes to your home value when you aren't selling?

No, I don’t.

Okay, well, it seems that I will just keep things as is, even if I lose my job. I was just trying to figure out what to do with my 401k should I lose my job.

I would literally take on credit card debt before I cashed out a retirement vehicle.

I would truly have to be looking at homelessness and bankruptcy.

Please don't do it.

Work at Taco Bell, or literally anything.

Amazon is hiring 100,000 workers at $17 an hour right now.

What do you do?  Where do you live?

How many people who are undisciplined enough to pull their money out will be disciplined enough to buy back in within a reasonable time?

Their whole logic is, 'oh teh noes, muh portfolio is losing everything! I must stop the bleeding!' So they sell low and then wait for the market to recover and buy high.

I just cant imagine anyone is so foolish as to cash out and then somehow come to their senses while the market is still near the nadir.

@TheEarloSammich

I’m a medical social worker. I made 104k last year. I live in a Commie state. I have great benefits. Already looking for another job.

I’m not cashing out anything. I was just thinking whether re-allocating everything into bonds would be a good move due to a possible job loss.

I had about 30% in bonds already, then moved 1/2 of the 70% in stocks into bonds, so about 65% bonds, 35% stocks, moved it before the big drops, but still down down about 16%.

It's all funny money anyhow.  Hoping it comes back up though.

My only input would be you should have an emergency fund for such a thing.  401k is not that. If it's traditional, you'll pay 30 to 40% to the taxes and penalty.  If you cashed out 100, you'll lose 30 to 40k before they even give you a check.

If you get through this ordeal,  please think about having 3 to 6 months expenses in a savings or money market account.

@Fella

I have 70k in the bank. Should i put this in a money market account?

Do you have an emergency fund?

Most financial advisors recommend keeping enough cash in the bank to cover 3-6 months of expenses for this very reason. Sure that money isn't gaining interest but it keeps you from have to use a credit card to pay bills or sell stock in a down economy to pay the mortgage.

If you loose your job reduce expenses, find a roommate, get a part time job mowing lawns, bump money from your parents if you can, sell some common easily replaceable guns or ammunition, whatever it takes.

3 to 6 months of expenses. Not income.  If you spend 3k a month,  you need 9 to 18k. If you spend 5, then 15 to 30.

Anything sitting in savings is being slaughtered by inflation and lost opportunity.

Invest the rest.

Lost my job but secured another job for 80k a year, 17k less but I don’t care. May not start until May, but have enough saved to ride it out. This sucks.

i put all of my retirement in a money market fund in November, i did not feel good about the market seeming to go higher everyday, had no idea a pandemic was coming

How is your brother feeling about that move today?

Classic "Buy High, Sell Low" mentality.  Maybe he'll get lucky and we will see another move downward but who the hell knows...and that's sort of the point.  Market timing with a 401k is pants on head retarded.

Yeah, he stated that he is switching back to what the plan was and no longer going to fuck with changing things.

Just found out he switched to the aggressive investment model for his 401k.

With today's rally I'm still down 80g. Let it ride. It will come back.

Glad to hear it.

If he sold after the drop, he locked in that loss.  Here's the other part of that equation.  Overall, interest rates have generally been declining.  What happens to bond prices when interest rates go down?  They go up.  So that means he sold stocks low and bought bonds high.  

I just gave someone on an earlier thread the real world example.  S&P 500 peaks at 1550 in 2007.  In 2009 it's down to 770.  In 2013 it's back to 1550.  That's 4 years to recover.  It's now at 2790, even after the losses.  That's an 80% gain since 2013, even with the virus induced loss.

I'm not sure I'd go aggressive just yet.  If I had 10K to invest, I think I'd put in  5K now and watch what happens in the next 2 months.  If the government tries to save the economy by opening the country too soon, virus cases will spike back up and the economy will be far worse.  Best thing to do is suck it up.  Fix the virus and  then fix the economy.

The thing about cashing out in anticipation of a big drop in the market is that a) you're basically having to get lucky (because it may not go down or it may not go down as much as you think), and b) if you got lucky by pulling out in time, now you have to get lucky again when trying to buy back in. Alot of the time the market drops so fast in a panic it will rebound at east partially just as fast, so while you're still anticipating it might go down some more, in a couple days it goes back up 50% and you missed it.

If you're skittish about massive market swings and that causes emotional swings about losing everything, you may want to asset allocation.  Instead of having all equities (stocks) and selling them all to switch to all bonds and then back and forth with that plan, you might want to set your asset allocation permanently to always keep a certain percentage of your retirement holdings in fixed income (bonds, bills, money market, whatever). Typically people increase that percentage as they get closer to retirement.

Losing your job sucks.  You have a good emergency fund, though, and hopefully a new job coming.  Cashing out retirement account would be the last thing I would do if I got in a financial bind.  You can leave the 401k with the current company (verify this with your 401k plan, though) until you get your new job and then decide if the new job's 401k is a decent enough plan that you want to roll the old 401k into the new companies 401k. If not, you could roll it into a Vanguard or Fidelity or other firm's Rollover IRA. Beware...having a Traditional IRA can limit future backdoor Roth conversions...so it's something to at least consider.

70k emergency fund?  Yeah, I'd at least put that in a money market fund to get a better interest rate.  I finally was making enough money, and had reduced debt enough, that I opened a brokerage account a few years ago, to try to grow my money outside of my retirement funds (I'm still planning to use it for retirement, but it's available money if I need it), so in that brokerage acct, I have 6 months in a money market fund and the rest of my non-retirement savings in a total market fund (if the total market fund lost 50%, I'd still have a couple years worth in case I lost my job) and it continues to grow by me adding to it and stock market growing.

If you have a traditional IRA that only has pre-tax contributions and if you're really lucky, your employer's 401k might let you roll that into the 401k plan.  That in essence gets rid of the traditional IRA and opens up the opportunity for back door Roth conversions.  I don't think this is the most common feature of 401k plans, but my former employer allowed it.

Just wanted to update you guys that Im starting my new job May 4th. I thank God for this new job. I have never been under so much stress in my life. It’s not exactly what I want, but I am going to make it work.

20 years to retirement to me means stay aggressive and let it ride.  In March I was "down" 50K vs my december account balance.  as of today I'm only down $30K.  Hopefully this dip doesn't take as long to recover from as compared to 2008.  That one took me almost 2 years of contributions and earnings to even out.

New job kinda sucks and is stressful.

That didn't take long lol.

Your brother is smart.  The market is in for a second correction because the Coronavirus is nowhere near defeated.  It's probably going to come back stronger since people are tired of the lockdowns and it wasn't even close to beaten the first time.  

Only like 3 months ago 15 people had it in the USA.  We're at over a million in America now.  Anyone that thinks it's stopping once we return to normal is nuts.  This is going to put a huge drag on the market and present a great buying opportunity in the near future.

I have made a near-100% recovery in my 401k by not moving a single thing. I wouldn't go conservative with 20 years left until retirement.

A few years ago, my Dad made a significant mistake and basically cashed out an account that, had he left where it was, would have averaged something like 12-15% annually over the next five years. That would have made a huge difference to his current retirement situation...

-shooter