Why Is My IRA Losing Money? What Can I Do To Stop It?

Shawn Plummer

CEO, The Annuity Expert

If you’ve noticed your IRA or Roth IRA dwindling, you’re not alone. Many people face this issue, often sparking the question, “Why is my IRA losing money?” Let’s explain the reasons and what you can do about it.

Can I Lose Money In An IRA?

Yes, you can lose money in an IRA and a Roth IRA. However, it is essential to remember that IRAs are not risk-free investment vehicles. Several risks are associated with investing in an IRA, which can lead to losses.

Some of the most common risks that can lead to losses in an IRA include the following:

  • The stock market risk: The stock market is one of the most common risks associated with IRAs. When the stock market goes down, the value of IRA assets can also decrease. This is why it is essential to diversify your IRA portfolio and not put all your eggs in one basket.
  • The interest rate risk: Another risk that can lead to losses in an IRA is the interest rate risk. This happens when the interest rates go up, and the value of your IRA assets goes down.
  • The inflation risk: The inflation risk is another one of the most common risks associated with IRAs. When the inflation rate increases, your IRA assets’ purchasing power decreases.
  • The political risk: The political risk is also a common risk associated with IRAs. This happens when the government changes the tax laws that impact IRAs.
  • Liquidity risk: Liquidity risk is another common risk associated with IRAs. This happens when you need to access your IRA funds before you reach retirement age and cannot do so.
Can You Lose Money In A Roth Ira

How Can I Stop My IRA From Losing Money?

You can do some things to stop your IRA from losing money. Some of the most important things that you can do include:

  • Diversify your IRA portfolio: One of the best ways to stop your IRA from losing money is to diversify your IRA portfolio. By investing in a variety of different asset classes, you can minimize the risks associated with investing in an IRA.
  • Choose investments suitable for your risk tolerance: Another way to stop your IRA from losing money is to choose investments suitable for your risk tolerance. For example, if you are a risk-averse investor, you should avoid investing in volatile asset classes such as stocks.
  • Rebalance your IRA portfolio regularly: Another way to stop your IRA from losing money is to rebalance your IRA portfolio regularly. By rebalancing your portfolio, you can ensure that your IRA is invested in the suitable asset classes.
  • Monitor your IRA account regularly: Another way to stop your IRA from losing money is to monitor your IRA account regularly. You can identify problems early by monitoring your account and taking corrective action.
  • Remove The IRA From The Market: Transferring the traditional IRA to an IRA fixed index annuity removes it from the stock market and places the account into an annuity not impacted by the stock market. So now you can earn interest based on an index, like the S&P 500, but without worrying about stock market volatility.

Related Reading: How to Protect Your IRA from a Stock Market Crash

My Ira Is Losing Money

I Opened An IRA And Immediately Lost Money. Why?

You may have lost money in your IRA immediately after opening it for several reasons. Some of the most common reasons include the following:

  • You invested in a volatile asset class: One of the most common reasons you may have lost money in your IRA immediately after opening it is that you invested in a volatile asset class such as stocks.
  • You didn’t diversify your IRA portfolio: You may have lost money immediately after opening it because you didn’t diversify your IRA portfolio. By investing in a variety of different asset classes, you can minimize the risks associated with investing in an IRA.
  • You invested in a high-risk investment: You may have lost money in your IRA immediately after opening it because you invested in a high-risk investment. For example, high-risk investments such as penny stocks are often more volatile than others and can lead to losses.
  • You didn’t rebalance your IRA portfolio: You may have lost money immediately after opening it because you didn’t rebalance your IRA portfolio. By rebalancing your portfolio, you can ensure that your IRA is invested in suitable asset classes.
  • You withdrew money from your IRA: You may have lost it immediately after opening it because you withdrew money from your IRA. You are subject to taxes and penalties when withdrawing money from your IRA.
  • You failed to monitor your IRA account: You may have lost money immediately after opening it because you failed to monitor your IRA account. You can identify problems early by monitoring your account and taking corrective action.
How To Stop My Ira From Losing Money

What to Do If Your IRA is Losing Money:

Feeling worried? Here’s what you can do:

  • Long-term Perspective: Understanding that IRAs are for long-term investments and avoiding panic-driven decisions during market downturns. The market is cyclic, and most losses recover over time.
  • Diversification: Spreading investments across various asset classes (stocks, bonds, cash, etc.) to mitigate risks associated with market volatility.
  • Target-date Funds: Investing in these funds offers automatic rebalancing of assets based on your retirement timeline, reducing risk as the retirement date approaches.
  • Regular Monitoring: Keeping an eye on your investment performance to make informed decisions when necessary.
  • Considering Annuities: Specifically, fixed index annuities are recommended for IRAs to gain market exposure without risking loss. These financial instruments can protect your savings from market crashes and provide tax-deferred growth.
  • Ask for Advice: Financial experts can give helpful advice. They’re like travel guides for your investment journey.
  • Stay Informed: Keep an eye on financial news. It’s good to know if more storms (market drops) are on the way.
  • Patience is Key: Remember, investing is for the long haul. Quick decisions can lead to mistakes.
Why Is My Ira Losing Money

Next Steps

If you are worried about losing money in your IRA, you can do several things to stop it from happening. By diversifying your IRA portfolio, investing in suitable investments, rebalancing your portfolio regularly, and monitoring your account carefully, you can minimize the risks associated with investing in an IRA.

Ira Losing Money

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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