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What to Do With Your 401(k) During a Stock Market Crash

You know the story of “The Tortoise and the Hare”? It turned out slow and steady won the race.

That applies to investing, too.

On Monday, the Dow Jones Industrial Average saw its worst drop since 2008 in response to news of COVID-19 and the oil price war, and the roller coaster ride the stock market has taken in the last two weeks has left plenty of investors feeling a bit queasy.

If you have a 401(k) or IRA, and you checked out its current value on Monday evening, you may have felt your own steep drop in the pit of your stomach.

Here’s what you need to know if you’re worried about your 401(k) amid the latest turmoil in the stock market.

How Your Retirement Investments Work

To understand why you shouldn’t panic too much about your retirement accounts, you need to know how they work.

A 401(k) is an employer-sponsored investment plan while Individual Retirement Accounts — either traditional or Roth IRA — are typically set up by the individual to invest money toward retirement.

If it’s a 401(k) or traditional IRA, you get the tax benefit up front and pay when you withdraw; with a Roth IRA, the withdrawals are tax-free. Either way, by adding money on a regular basis, these accounts let you grow your retirement nest egg that you can live on in your retirement.

In the beginning, you’ll have more time to take risks on investments — like stocks — and when you get closer to retirement age, you’ll shift investments to less-risky categories like bonds and cash that don’t lose their value during a market slump.

So even if there’s a dip in the stock market, you’ll have time to recover if you’re younger and you’ll be better protected from fluctuations as you near retirement.


What to Do With Your 401(k) During a Slump

Watching your 401(k) balance take a tumble isn’t anyone’s idea of fun. We get it.

But this is not the time to panic, according to Certified Financial Planner Holly Donaldson of St. Petersburg, Florida.

That’s because the cash component of your account, as well as the contributions you should absolutely continue to make, can be used to buy up more funds at rock-bottom prices.

So selling is the last thing you want to do because you’d be locking in your losses.

In fact, Donaldson suggests ignoring your newsfeed if it puts you in a panic about your retirement accounts.

“What I advise is you use the calendar and not the news,” said Donaldson, who suggested checking in with your portfolio on a quarterly basis rather than a daily one.

Pro Tip

Don’t withdraw your money from an IRA or 401(k) — the penalties for early withdrawal are substantial.

She noted that it typically takes the stock market one to two years to correct itself, so a single day — or even a few weeks — of volatility should not change your long-term strategy.

Avoiding the stress of hourly updates on your investments is key to not only a balanced financial portfolio but your mental health, too.

“If a 27-year-old wants to increase their chances of suffering chronic anxiety, then yeah, sure, look at your 401(k) every day,” she said.

And even if you’re closer to retirement, Donaldson recommended talking to an hourly financial planner or speaking to your employer’s 401(k) representative to ensure your portfolio has the right mix of stocks, bonds and cash.

Slow and steady. Wins it every time.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here , then catch her on Twitter @TiffanyWendeln.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2020.

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The 7 Best Stores to Use Coupons

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The 7 Best Stores to Use Coupons

As a budget-conscious shopper, you’re constantly looking for ways to stretch each dollar further. So when you have the time, you might use manufacturer’s coupons. But, it doesn’t always seem worth the hassle to look for them, clip them, print them out, etc. That may be because you’re not exactly sure how to use coupons or you’re not shopping at the most coupon-friendly stores.

Couponing can, of course, mean paper coupons, a coupon code, digital coupons, or whatever else grocery stores accept. You don’t have to be into extreme couponing to make money using coupons, coupon codes, or whatever form they may appear in. Sometimes you get a better deal on grocery coupons by joining a loyalty program or downloading coupon apps. In other cases the free coupons that come in the mail or an online coupon might offer the biggest value.

Once you’re ready to shop we’ve compiled the seven best stores to use coupons.

Harris Teeter

This regional grocer has a generous and comprehensive coupon policy. The chain helps you maximize savings by accepting up to 20 double coupons per day. You’ll also save time by downloading the grocer’s coupons from their mobile app to your store loyalty card. Just present your card at the cash register to get the discounts — no clipping required! If you live in Delaware, Maryland, North Carolina, South Carolina, or Virginia, you should give shopping at Harris Teeter a try.

Pro Tip: Try using a grocery store app, like Ibotta, in addition to your coupons. You’ll be flush with savings!

Sam’s Club

The national wholesaler aims to make saving money super easy for you. While the store doesn’t accept manufacturer or competitor coupons, it does offer in-house clipless coupons on items throughout the year. You’ll receive all discounts automatically during checkout. In addition, as a Sam’s Plus member, you can earn 2% back when you make a qualifying purchase. If you regularly buy in bulk, it makes sense to check out Sam’s Club. (But remember, you do have to be a member to shop at Sam’s Club).

Rite Aid

This national pharmacy is known for its helpful coupon policy. The chain accepts manufacturer coupons and allows coupon stacking, which lets you use both a store coupon and a manufacturer coupon on the same item. Since nobody likes to clip coupons, Rite Aid offers e-coupons that can be loaded on to your store loyalty card and automatically applied at the check stand. With locations in 30 states, chances are good that you’ll be able to give this coupon-friendly pharmacy a try.


This national grocer hooks you up with coupon savings electronically. You can download clipless coupons from the store’s website or mobile app to your store loyalty card and instantly apply the discounts at checkout. In addition, the chain is piloting a cash back program. Simply register your loyalty card, make qualifying purchases, and watch the cashback roll in. Cashback can be redeemed in-store or deposited into your PayPal account. If there’s a Kroger in your town, consider making your next grocery run there.

Related reading: Just getting started with coupons? Here’s what you need to know.


This regional grocer dominates the Southeast and is known for its customer-centric way of doing business. The store’s liberal coupon policy accepts both manufacturer and competitor coupons. You can even use a competitor coupon on a private label product or a BOGO offer! The grocer will also allow you to stack a manufacturer coupon with either a store coupon or a competitor coupon (not both) to really maximize your savings. As a Publix Club member (free to join), you can send clipless coupons to your personal account and easily apply them at checkout. If you frequent Publix, using coupons will absolutely enhance your experience.

Dollar General

This national budget retailer has a coupon policy designed to foster loyalty with the brand. While competitor coupons are not accepted, manufacturer coupons are welcomed. And, while the retailer doesn’t permit double coupons, you can stack a store coupon with a manufacturer coupon. For extra savings, you can also stack multiple store coupons! Dollar General offers both printable coupons and digital coupons on its website so you can clip or click your way to a great deal. If you have a Dollar General in your neighborhood (who doesn’t?!), try making your next household supply run there.

This national pharmacy has become known as the king of long receipts. But, the chain is also famous for allowing customers to stack savings! The store accepts manufacturer coupons and grants you access to store coupons (printable and digital) via their loyalty card. You can usually use store coupons in conjunction with manufacturer coupons in any combination as long as all purchase conditions are met. As a loyalty card holder, you’ll also receive 2% back on qualifying purchases. With a CVS practically on every street corner, it’s easy to test if the pharmacy’s coupon policy helps your budget.

Coupons don’t have to be hard

Using coupons can be a time-consuming pain in the neck. But it doesn’t have to be that way! More and more stores are offering clipless digital coupons for instant savings at checkout. And there are plenty of retailers that will compete for your business with lenient coupon policies. Try shopping at some of the stores above and see for yourself!

–By Laura Gariepy

Tell us: What other companies should make the best stores to use coupons list?


Why Sinking Funds are Your Budget’s Best Kept Secret

What is a sinking fund? And how does it help your budget? Read this post to read why sinking funds are your budget’s best kept secret!

Looking for more posts on how to budget? Go HERE.

Guest post from Jessi of

There’s sort of this best-kept secret in the world of budgeting and all things personal finance. Maybe you’ve heard of it before or maybe it’s a new concept. Regardless, I have to tell you about it because it has saved our family’s financial life more times than I can count!

So, what is this mysterious secret? Sinking Funds.

Yeah, I know, it doesn’t sound all Hollywood glamour but trust me, these bad boys work!

What is a Sinking Fund?

A Sinking Fund is a separate entity fund that you fund from your monthly household budget for a specific purpose. So in our household, we have Sinking Funds for auto-related expenses, home-related expenses, Christmas, and Vacations (we’re still working on setting up one for healthcare).

Each one of these Sinking Funds is a separate bank account (we use online banks for these as they typically don’t charge you bank fees) that we keep funded. For example, in our Auto Fund, we prefer to have a minimum of $1,000 in that account. So if we use that account and the balance dips below a $1,000 then that Fund becomes a priority in our household budget to bring the balance back up.

How does this help your budget?

To illustrate this, let’s talk about Edna. Edna was my husband’s 2006 Chevy Colorado. Back when we were first married in 2009, Edna started having issues. She spent a ton of time in the shop and no one could figure out what was wrong with her. Long story short, we ended up paying over $5,000 trying to fix a problem that should have only cost us around $20 to fix.

The issue is that we were newlyweds and I was still in college — meaning, we were broke. We not only drained our checking and savings accounts to pay for this mystery repair but we also put a lot of it on a credit card. To say that we were stressed was an understatement! But the outcome of this stressful event was the creation of our Auto Sinking Fund.

Our Auto Fund exists to keep a similar situation from ever occurring again. Now whenever one of our vehicles needs a repair or even just regular maintenance like an oil change or tires, we just take the debit card that is linked to the Auto Fund and pay for it. There’s no stress on our household budget for that month. And we get to avoid having to dip into the Emergency Fund to pay for it.

How do you set up a Sinking Fund?

The key to setting up Sinking Funds is to remember that you’re not going to be able to set them all up all at once. You’re going to need to take some time to build up these funds. I suggest you start with the most pressing Fund that your household needs in place. For my household that was the Auto-Fund but maybe for your household, it’s the Healthcare Fund or Home Fund.

Regardless of what Fund you decide to start with, pick one and then determine a minimum balance threshold. Again, with our Auto-Fund the threshold is $1,000. If you picked a threshold of $1,000 then you would work to build that account up to $1,000. Then once you’ve achieved that goal, you’d then pause contributing to that Sinking Fund and then start building your next Sinking Fund.

Why banking accounts and not cash?

For most of our Sinking Funds, we use bank accounts to save versus keeping them in cash. Mainly this is due to the fact that I’m married to a Spender and keeping money just hanging around is a little too tempting. Also, we’re both not comfortable having thousands of dollars just sitting in our home.

However, we have used the cash method before to build up certain Sinking Funds. Mainly those types of Funds are “quick” ones. Meaning, they’re going to get used up sooner rather than later. For example, when my husband was turning 30 we were still on the debt-free journey. However, I still wanted to gift him something special. He had his eye on this massive cabinet saw (my husband is a Master Carpenter), but it was $700. So, I set up a Sinking Fund where I set aside a certain amount of money from our budget every month into an envelope to build up the cash I needed to hand him on his birthday to go buy his saw.

That type of Sinking Fund is more temporary than our other ones. So using cash to build up Sinking Funds is a great idea when it is a temporary type of Fund, but for the more “guaranteed” type of events, I think an actual bank account should be used.

How do you budget for these Sinking Funds?

To budget for these Sinking Funds, take the minimum threshold balance you decide on and determine how quickly you want to save up. For example, if your threshold is $1,000 and you want it saved up in three months you’ll need to set aside at least $334 every month to achieve that goal. You could then further break that down into how much you need to set aside from each paycheck. If you’re going to receive two paychecks in a particular month, you’d have to set aside at least $167 from each paycheck to achieve your goal.

It takes a lot of self-discipline to achieve these types of goals but I have no doubts that you can do it! Trust me, once you start using Sinking Funds, you’ll be in a much better spot financially! You’ll also be less stressed! Nothing compares to the radiator blowing in your car and not having to stress out over the repair costs because all you have to do is go into your Auto Fund to pay for it. Honestly, it is an incredible feeling not having that stress of financial doom lurking over your head!

Do you use Sinking Funds currently? Have you thought about starting one?

Jessi Fearon is a wife and mom to three little kiddos. Her family paid off just over $55k of debt in 2 years and they’re now 100% debt-free after paying off their mortgage in January 2020 – all on a $47,000/year salary. She loves coaching others towards achieving their dream life by learning to manage their money and embracing their own real life on a budget.

Brett Arends’s ROI

Brett Arends

It’s a golden chance for a portfolio do-over

Don’t sweat the crash, use it

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If you’re among those kicking yourself for not having the foresight to sell all of your stocks a month ago, don’t.

Instead, congratulate yourself on your wisdom and foresight for hanging on.

That is not because of the monster rally of the past few days, which has clawed back just a small portion of the trillions lost.

It’s because while your stock portfolio may be down, many other investments, which you could usefully buy, are down even further. And that means you suddenly have a golden opportunity to redo your portfolio, broaden your risks and improve your diversification. And you’re better off doing it today than you would have been last month.

Consider: If you’re like most regular U.S. investors, you have most or even all of your stock market investments tied to just one index: The S&P 500 SPY, +0.46% , which tracks the 500 biggest companies in America.

It’s the biggest index in the world, and the one that most mutual funds follow when they offer a plain vanilla “U.S. stock market fund.”

In the past month the S&P 500—even counting the latest rally—has fallen 17%.

But during the same period of time, U.S. small-company stocks, as measured by the Standard & Poor’s 600 Small Company Index SML, +1.31% , have fallen 26%. So if you transfer some money today from your S&P 500 fund such as the SPDR S&P 500 SPY, +0.46% to a U.S. small cap fund, such as the SPDR S&P 600 SLY, +1.34% , you’ll actually get a much better deal than you would have done a month ago.

And it’s the same for almost everything else. Real-estate investment trusts or REITs, both in the U.S. and overseas, have fallen by much further than the S&P 500. So you’ll get more, say, Vanguard Real Estate VNQ, -0.39% and Vanguard Global ex-U.S. Real Estate VNQI, -0.83% than you would have done in February. “International” funds, which invest in the MSCI EAFE index 990300, +0.41% of developed overseas markets of Europe, Australasia and the far East, and “emerging markets” funds that invest in places like China, South Africa and Brazil, are all much cheaper than they were a month ago. U.S. investors switching their money into funds such as iShares Core MSCI EAFE ETF IEFA, +0.15% , SPDR Portfolio Emerging Markets ETF SPEM, -1.31% and Vanguard FTSE All World ex U.S. Small Cap VSS, +0.29% are getting a comparative bargain.

They’ve all fallen by more than the S&P 500. In most cases, by a lot more. So the portfolio do-over is actually a better deal now than it was in February. You just got a discount.

If you want to look at individual markets overseas—and it’s not necessary—the scale of the crash is hard to fathom. Since 1988, for example, the economy of Taiwan has quadrupled. But this week the Taiwanese stock market went back to the levels it was at when Ronald Reagan was U.S. president.

The Japanese and Italian stock market indexes this week also fell back to 1980s levels. Germany’s fell to the late 1990s. South Korea and Australia were back to the mid-2000s.

Those who think investments other than the S&P 500 are “too risky” or are best left to professionals have it exactly upside down. The bigger risk is tying all your retirement portfolio to a single index.

Sure, the S&P 500 has been the place to be during some decades, such as the 1990s or the one just past. But during other 10 year stretches the index has been dead money, or worse.

The S&P 500 lost ground from 2000 to 2009. Meanwhile U.S. small-caps rose 85% and Emerging Markets more than doubled. During the 1970s the main U.S. stock index failed to keep up with runaway inflation. But the emerging Asian “tigers” of the era boomed: Japan went up 400% and Hong Kong 800% — really—during the decade. Even during the boom of the 1980s, you were better off investing in Europe and Japan than you were in big U.S. companies.

All of which suggests that when you held on to your big S&P 500 index fund last month you were being wiser than you thought—assuming you want to take advantage of an opportunity to diversify.

Brett Arends’s ROI

Brett Arends

7 lessons for managing your retirement accounts in this — or any other — erratic market

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1. You really can’t time the market and shouldn’t try. Those who panicked and cashed out just missed a massive, 10% single day jump. And this happens in every crash. Dalbar, a financial analysis company, calculates that ordinary investors have on average missed out on most of the stock market’s long term gains over the past 30 or more years. “One major reason that investor returns are considerably lower than index returns has been the fact that many investors withdraw their investments during periods of market crises,” it wrote in a research paper sent to clients in November. “Since 1984, approximately 70% of this underperformance occurred during only 10 key periods. All these massive withdrawals took place after a severe market decline.”

2. History may be repeating itself. Historically the biggest stock market jumps have come after giant plunges. The giant crash of Oct. 19, 1987 was followed by a 10% surge in the Dow (DJIA) on Oct. 21. The worst two days of the famous Wall Street Crash of 1929, on Oct. 28 and Oct. 29, were followed by a massive 12% surge in the Dow on Oct. 30 — the market’s third best day ever in percentage terms. The 10% plunge on March 12 of this month was followed by a 10% rocket on March 13.

3. Watch out for history repeating itself still more. Historically, the biggest one-day stock market jumps have also taken place during bear markets where the stock market then resumed falling again. Since 1900, 14 of the stock market’s 20 best days have been during bear markets, where prices kept falling.

4. A major reason for the stock market’s bounce is almost certainly technical. Hedge funds and other speculators had been making big money on the way down by borrowing stock they didn’t own, selling it in the market, and getting ready to buy it back later at cheaper prices. Such so-called “short selling,” which is perfectly legal, makes money when stock prices fall. However, it leaves speculators vulnerable to a sharp jump in prices. When that happens, they rush to buy back stock and close their positions. That causes a further jump in prices, though it may be short term.

5. The rally doesn’t mean good news for the economy just yet. When that happens we’re likely to see a slump in the price of so-called “safe haven” assets, such as Treasury bonds, Treasury inflation-protected securities, also known as TIPS, and gold. Instead, Treasury and TIPS prices barely moved on Tuesday from their brace-for-impact levels, and gold jumped 10%. Treasury bonds are offering interest rates of less than 1% for another 10 years. At current levels the stock and bond markets are still forecasting prolonged economic slumps.

6. Your broker is probably reminding you about now that if you miss out on the stock market’s biggest one-day jumps you will miss out on a big chunk of your long-term returns.And that’s true. But it’s only half the story. Avoiding the worst one day crashes — such as the carnage so far this month — is also about as good for your wealth as catching the big one-day rallies. Bottom line? The worst possible outcome is to chase these rallies after they’ve taken place. You can easily end up catching the crashes and missing the bounces. That’s how you lose your shirt. Buy and hold investors, of course, can just ignore the turmoil. But those who are on the sidelines need a disciplined approach to reinvesting. One simple rule that anyone can use, and which has significant academic support, is to compare the S&P 500 SPX, +0.39% with its average price for the last 10 months, or 200 days. Get out of the stock market when the S&P 500 falls below the 200-day moving average, and stay out until it gets back above it again. One study has shown that just following this rule would have spared you all the terrible stock market crashes of the past century without sacrificing much in long-term returns. Note: Even after Tuesday’s surge, the S&P 500 would have to rise another 28%, to 3044, to reach the 200-day moving average. That would mean roughly 27,000 on the Dow DJIA, +0.25% .

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