Coping with market chaos
and shrinking 401(k)s

I’ve done my part to help stabilize the market. I put money into the hubby’s and my retirement accounts.

A fat lot of good that did. The Dow tanked again today (worst week ever). But I still believe in sticking with stocks. As one analyst on CNBC said yesterday (yes, I’m still watching the financial news; and sorry, I didn’t catch the guy’s name), when you get out of the market you have to guess right twice:

1. That it is indeed the correct time to pull your money, and
2. When the market rebounds, and it eventually will, that it’s time to get back in.

The problem with timing your investment escape is that if you hang on too long, a plummeting market can torpedo your wealth.

And if your timing is off with your get-back-in guess, you could miss some rallies, since when the market turns
around, it usually does so quickly.

So what are you doing? If you have stock investments in addition to your workplace 401(k), are you holding on, bailing out or something in between? Let us know via this poll.

Coping with 401(k) fallout: If all your stock exposure is in your 401(k), there’s not much you can do aside from halting your contributions. But is that a good move? Should you change your 401(k) fund if it’s taking a particularly hard hit right now?

As you probably know by now, the advice most experts offer is to take a breath.

Walter Updegrave, senior editor at Money Magazine, says, "Switching your 401(k) money into bonds or even cash for that matter may make you feel better in the short-term. But by allowing fear and panic to dictate your investing strategy, you are undermining your long-term prospects for a comfortable retirement."

Updegrave says the sky isn’t falling, stocks will be back and if you must do something, readjust your mix of stocks and bonds based on how much risk you’re comfortable taking and when you plan to retire. You can read his complete advice here.

Over at CNNMoney, Gerri Willis also fields reader questions about 401(k) contributions in a down economy.

As for adding to a company pan, Willis points out the value of company matches, otherwise known as the proverbial free money. "And while the economy is on shaky ground right now," says Willis, "the fact that the stock market has been hitting lows means that stocks are on sale."

What about suspending contributions to a 401(k)? Wills says stopping contributions generally is a bad idea for several reasons.

First, you miss that free money match and secondly, a lot of folks forget to restart their contributions.

Willis also points out the problem with figuring out when to get back into the market.

"It’s impossible to time the market in order to catch the uptick in stocks," she says. "If you missed the 20 best days in the market,  your returns crater 43 percent, according to one study."

Read the rest of Willis’ advice here.

Historical stock data: Tired of hearing about what’s going on with the economy and stock market right now? Maybe learning how we came out of similar situations might offer some comfort.

Check out Five Books on Financial Crises. Each one explores a different time in history when the United States faced financial turmoil.

From the panic of 1907, in which J. P. Morgan stepped in to calm the capital markets, to the collapse of long-term capital in 1998, which provoked an unprecedented bailout by a consortium of banks, these five publications explore more than 100 years of financial catastrophes.