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Stock drop affects retirement plans

4 years ago August 08, 2011 Aug 8, 2011 Monday, August 08 2011 Monday, August 08, 2011 9:58:18 PM CDT in News
Source: WBRZ
By: Ashley Rodrigue

BATON ROUGE-  Another major down-day on Wall Street has left your 401K taking another huge hit.

And you've had lots of questions about what will happen next.

We took questions you posted on News 2's Facebook page to financial experts.

The first answer from our experts: Don't Panic.

"You should never change your assets in a 401K out of a knee jerk reaction to anything," said LSU Finance Professor Rejesh Narayanan.

He says what's happening on Wall Street will only affect what's happening to your retirement plan as much as you let it.

Narayanan said, "There is no one golden formula for everybody, you pick based on your risk tolerance and time horizon, you pick the kind of asset allocation."

Financial analyst Bud F. "Andy" Anderson, with BF/Anderson & Co., says risks should not be aggressive right now, but you should still be taking them on something.

He said, "Since the beginning of the century, we've had 15 panics, crashes, recessions, whatever you want to call them, we've recovered from every one of them."

And the when?  The answer is a while, but possibly the end of the year.

Anderson said, "We were just getting back to where people would at least want to discuss the stock market, but with what's going on today, confidence is out the window again and it appears it's gonna be quite a while to repair the damage."

"We don't clearly know all the details of the budget control act so until all those spending cuts are spelled out and how these things play out, the uncertain environment is going to exist and we're gonna see a lot of volatility associated with that," said Narayanan.

The experts say if you're too nervous about what's going on in the markets or if you're close to retirement, consider shifting some of your assets toward fixed income or cash.

As for this being a repeat of 2008, both analysts say that's unlikely, giving that scenario a one in three chance.

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