Sinking 401(k)s Raise Debate on How to Save

Accounts tumble by up to 11%, but backers still love them
By Katherine Thompson,  Newser Staff
Posted Oct 12, 2008 8:30 PM CDT
Will Americans' personal golden parachutes end up amounting to nothing more than spare change?   (Flickr)
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(Newser) – Tumbling stock markets have cracked open the piggy bank that many Americans use to store retirement savings—401(k) accounts—sparking fresh debate about how best to save money, the Washington Post reports. Supporters argue that 401(k)s offer bigger rewards than traditional pensions, which are less exposed to market turbulence. But they lose more on average too—between 7.2% and 11.2% over the last year.

Critics argue that plummeting 401(k)s hurt the economy in other ways, like forcing people to work past age 65, freezing young people out of the job market. "That has a perverse effect on the business cycle," one analyst said. Either way, experts advise against pulling out of your 401(k) unless you can't sleep at night. Hold on tight, they say, until you regain your losses.
(Read more 401k stories.)