Why Is My 401k Dropping? What Every Beginner Investor Needs to Know
*I am not a licensed investment professional and do not give investment advice. The purpose of this article is to provide information and education around commonly accepted investment principles. Please consult with a licensed investment professional for advice on what you should do given your situation.
If you’ve checked your 401k balance lately, you may have noticed that your total balance has gone down. Or you’ve been reading the news about the stock market dropping and wondered how that will affect you. If so, you might be freaking out right about now. And that’s understandable—it looks like you’re losing all that hard-earned money that you diligently put in your account like everyone said you should do.
So should you be panicking? Probably not.
Of course nothing is guaranteed, but it is normal for the stock market to go up and down. While it’s unsettling to see your retirement savings shrink, this post will help you understand what’s happening, why it’s happening, and what (if anything) you should do about it.
What’s Actually Happening? (And Why It’s Not as Bad as It Feels)
First, it’s helpful to understand a little about what’s actually happening with your 401k or other retirement account.
A retirement account is a special type of investment account. Think of it like a bucket that holds different types of investments, like stocks and bonds.
When you buy a stock, you're buying a piece of a company. You buy it because you think it is going to do well. Sometimes the company shares some of its income with you because you are a part owner.
The price of those pieces changes every day. Some days, those prices go up, and your account balance looks great. Other days, those prices go down, and it looks like you’ve “lost” money. But here’s the key: You haven’t actually lost anything unless you sell.
Let’s say you own a house, and the market value drops by $20,000. Does that mean you’ve actually lost $20,000? No—because you still own the house. The value could go back up next year. The same thing happens with your investments. Unless you sell at a low price, your losses are just numbers on a screen.
Why Is the Stock Market Dropping Right Now?
The stock market moves based on what’s happening in the economy. Right now, there’s a lot of uncertainty—things like inflation, rising interest rates, layoffs, and global events make people nervous. When investors feel uncertain, they’re less willing to buy stocks, which causes prices to drop.
This happens all the time. The market is constantly fluctuating, sometimes in bigger ways than others.
So far, despite regular ups and downs, the stock market has always gone up in the long term.
Note: I’m hearing people say things like “These are unprecedented times. What if this is the time when the market doesn’t recover?”
And this is understandable. There are a LOT of scary things going on right now—things that could/will hurt a lot of people. But as a history major, I also know that people have felt this same way at many points during modern history. So far, they’ve all been wrong and the market has bounced back.
So yes, it could happen. There’s always a possibility. But there’s also a good chance that everything will be fine in the long run, just as it has been in the past.
If you’re worried, I encourage you to speak to a licensed financial/investment professional who can help you find perspective and develop a strategy that feels safe to you. The worst thing you can do is make decisions at the height of emotion—out of fear and panic. The goal isn’t to ignore risk—it’s to make smart, informed choices that set you up for long-term security.
Am I Actually Losing Money?
If you see your 401k balance drop, it’s easy to feel like you’re watching your hard-earned money disappear. But remember:
The number you see is what you’d get if you sold everything today—not an actual loss.
If you don’t sell, your investments still have time to recover.
You still own the same number of shares—their price is just lower right now.
Selling during a downturn locks in those losses. Holding on gives your investments the chance to bounce back.
What Should You Do Right Now?
1. Don’t panic.
It’s tough to see your balance drop, but market dips are normal.
2. Avoid checking your balance daily.
Watching your 401k like a hawk will only make you anxious. The best investors don’t obsess over daily ups and downs.
3. Stick to your long-term plan.
Retirement savings are meant for the future, not for today. The market will go through ups and downs, but history shows that it tends to go up over time.
4. Make sure you’re diversified.
Spreading out where you keep your money and the types of investments can help reduce certain risks. Consult with an investment professional to learn how to do this. (Good news: Most 401ks automatically invest in a mix of different companies to spread out risk.)
5. Consider talking to a financial professional if you’re really unsure about your strategy.
Many financial influencers will tell you not to pay a financial planner or investment advisor because they cost too much. But financial professionals can be worth way more than what you pay them, particularly if they help you avoid costly mistakes (like selling all of your investments in a down market). It’s always okay to hire a professional when you want help and expert advice.
The Hidden Risk: Not Investing at All
It might feel safer to pull your money out of the market when things are down, but the truth is, not investing is risky too. Inflation means that over time, your money loses value if it just sits in a savings account. Investing is what helps your money grow enough to support you in retirement.
Even though downturns can be scary, sticking with it is what leads to long-term success.
And buying investments when they’re down gives you an even bigger chance for growth (it’s like getting them on sale).
Investing can feel overwhelming, risky, and scary. It’s okay to be nervous when you’re new (or even when you’re not). Investing requires a completely different mindset than other areas of managing money.
Just remember:
Market drops are normal.
You haven’t actually lost money unless you sell.
The market has always recovered over time.
The best thing you can do is stay calm and stick to your plan.
And if you need help, it’s okay to ask for help from a qualified investment professional. Look for someone who is a fiduciary (has YOUR best interest at heart), doesn’t talk down to you, and wants to help you make a plan that feels right to you.
