“Is it unwise to move funds with the recent stock market performance being down?”: I have to decide whether to reallocate my 401K funds, but I’m worried about the current market downturn. How should I proceed?

Hi Money Minder,

I’m a newbie when it comes to retirement planning and trying to get my act together. My current 401K is sitting at $390K, with 56% in Lifetime Investment Strategy and 44% in Equity Fund (S&P 500). I got some suggestions to invest in TDF 2040, but should I move my current funds into that or just put all future funds there? Also, is it risky to move money given the recent market downturn? Sorry if that’s a silly question!

Here’s some more info: I’m a 50-year-old female, single with no kids. I have a pension from work worth about $430K. I still have 11 years left on my mortgage at 2.75%, owing about $175K on my house. No car payments and a little credit card debt that I’ll clear by the end of the year. Planning to retire around 65, with an annual income of roughly $130K.

Thanks for your help Money Minder!

Retired and Secure

Response from THE MONEY MINDER:

Hello There,

Hello, novice, thank you for sharing your current financial situation with us. Given the details you provided, it seems like you are taking proactive steps towards planning for retirement, which is commendable. Regarding your question about investing your 401K funds into a TDF 2040, here is a practical approach you can consider.

Since you already have a substantial amount in your current 401K account, a suggested approach would be to keep your current funds diversified as it is – 56% in the Lifetime Investment Strategy and 44% in the Equity Fund. Moving them now, especially with recent fluctuations in the stock market, may not be the most prudent decision considering your proximity to retirement.

Instead, you could consider directing all FUTURE funds into the TDF 2040 to align with your retirement timeline. This way, you can gradually transition towards a more age-appropriate investment strategy without exposing your current savings to market uncertainties.

Given your age, income, and financial obligations, it’s essential to continue balancing your investment portfolio with a mix of growth and stability. Also, since you have no plans to retire until at least 65, maintaining a diversified approach can help mitigate risks while still aiming for long-term growth.

Overall, while it’s essential to stay informed about market conditions, it’s equally important to focus on a long-term investment strategy aligned with your retirement goals. If you have any doubts or concerns, consulting with a financial advisor could provide personalized guidance tailored to your specific needs.

Best of luck on your retirement journey, and remember, strategic planning and consistent contributions will steer you towards a secure financial future.

Farewell from THE MONEY MINDER.