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You might have noticed the value of your 401(k) drop significantly over the past year. Many are now considering to re-direct contributions to somewhere else until the economy gets settled. Some people are putting their 401(k) contribution to a more secure investing option.

But before you make a move to change your contribution plans, think whether this tactic is a good investing strategy. If you have settled on a 60% stocks and 40% bonds for your long-term investing strategy in your 401(k), you might have chosen to allocate them that way because you estimated that this blend will give you a decent nest egg with high enough returns. If you are now redirecting the contributions to, say, a money-market fund, you are creating a new portfolio mix that is more conservative than the one you had before.

By doing this what you are saying is basically that you are not confident about the strategy that you have chosen before. It may be okay to reconsider your long-term investing approach but do understand that it is not a good idea to change your long term strategy everytime the market changes, whether it takes a dive or soars high. It is after all a long term strategy.

Before making any decisions to redirect your contribution to your 401(k), the first thing you should do now is to re-assess your strategy. Here is an online tool to give you a retirement check-up – Retirement Planner.

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