A lot of us are looking at Q4 401(k) statements that aren’t especially pretty, but that’s no reason to reduce contributions to your 401(k),  ignore it altogether or – worst of all – withdraw from it to deal with current expenses.

At current valuations, continuing to contribute to your 401(k) makes great sense – after all, you’re buying shares at distressed prices and when the market eventually turns around, – as it will – the investments you made during the latter half of ’08 and which you make now will dramatically increase in value.  Contribute as much as you can and make sure you fully take advantage of your employer’s match.

Don’t stick your head in the sand, either.  Getting disgusted and ignoring any of your investments is a particularly bad idea.  Take some time now to do a little research and identify what changes you need to make.  Avoid the temptation to ditch high quality funds because they’ve been trounced – nearly everything has!   But if you do have dogs in your portfolio, best to make the change now and invest in funds or stocks that are better positioned to take advantage of the market’s rebound.

Additionally, now is a good time to revisit your asset allocation.  Check with your your 401(k) plan’s administrator, your HR office or logon to your plan’s site and check the recommendations for someone of your age, income, goals and investment objectives.

Finally, don’t withdraw from your 401(k) unless you find yourself facing the most dire of circumstances.  In addition to paying penalties, you’ll simply be borrowing against your future security – never a good idea.

Good luck – keep a cool head and make sound choices – the market will turn around eventually!

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