Government shutdown could hit you in your 401K

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by Karen Hopkins, 13News Now

WVEC.com

Posted on October 1, 2013 at 5:52 PM

Updated Tuesday, Oct 1 at 6:00 PM

NORFOLK - Your 401K savings account could take a hit thanks to the government shutdown.

“When the government shuts down, the markets can have a negative reaction. When there is a negative reaction, it’s reflected in the value of the stocks, which is reflected in 401 k. It’s a chain reaction,” Tidewater Community College Professor Peter Mark Shaw remarked.

The last time the government shutdown, the average investor lost $7,000 from their 401K in two weeks.

This time around, there is no way estimate to how much people will lose because the market is so finicky. Shaw says you shouldn’t over-react with your account.  If you have solid investments, know that the shutdown is temporary and things will get back to normal over time.

Shaw explained his biggest concern is if the Congress fails to extend the debt ceiling.

“If the government defaults, that will wreak havoc in interest rate markets on a scale that would make Greece look like a walk in the park,” he predicted

As for the current shutdown, "You might see slight downtick in the market, you might start seeing it today or tomorrow,” he warned.

Will shutdown have an impact on market?

'“I would hope not, hoping the markets will say we believe this will be a short term blimp. If it doesn’t, that would cause great concern because it means something the market knows we don’t know.”

Shaw recommends logging onto www.fool.com as to learn more about the effects of the government shutdown on your 401K.

 

 

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