I took my 401(k) savings out of life-cycle funds and moved them to a money market account because I couldn’t bear to see it shrinking. Small interest is better than no interest!

Should I open a new life-cycle fund now for current contributions while buying low, or continue adding to the money market? When the economy picks up I’ll move everything over again.
Lyn Ewers

Mesa, Ariz.

Lyn,

I know it’s easy to panic in this market. Nearly every day, we hear news of the stock market sinking lower and lower, and seeing a smaller balance on your statement can be tough to swallow, to say the least.

But the beauty of life-cycle (or target-date) funds is that they rebalance themselves as you get closer to retirement age, so you don’t have to do the work. They essentially become more and more conservative as your time horizon shrinks.

You don’t mention how old you are, but I’d say that jumping back into those life-cycle funds with at least a portion of your savings is a good idea. I, personally, wouldn’t do it all at once though. I’d divide my nest egg into six chunks and dollar-cost average my way back into the market over the next 18 months.

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