How To Protect Your 401(k) And IRA From Losing Money In A Stock Market Crash

Shawn Plummer

CEO, The Annuity Expert

Is the market about to crash? This guide teaches how to prepare, protect, and grow a 401k, IRA, retirement savings, and investments before, during, and after a stock market crash and recession. In addition, the guide will go over the difference between a bear market and a bull market, a brief stock market crash history of the New York Stock Exchange, and a solution to combat the losses to retirement plans and avoid long recovery times.

Americans like to talk about whether the stock market is rising, the market is falling, or how much money their 401k has earned or lost. However, the recovery time between a crash and the amount of time before the market fully recovers to its previous high point is not a part of the conversation.

The recovery time is critical because this is the time before investors “break even” on their retirement plans (401k, IRA, Roth IRA, etc.). Unfortunately, not all Americans have the time to wait to break even, specifically someone planning to retire soon.

So let’s dive in and figure out how to grow your retirement savings even in tough economic times. So don’t wait – read on to learn more!

What Is A Stock Market Crash?

A stock market crash is a sudden, sharp decline in stock prices. It is typically caused by a combination of factors, such as a weak economy, high levels of debt, and low consumer confidence. The market dropping can lead to a recession.

What Is A Bear Market?

A bear market is defined as a decrease of at least 20 percent in stock prices over two months. Bear markets are typically associated with economic recession and periods of high inflation. While there is no set definition, most experts agree that a bear market signals a period of pessimism and decreased investor confidence.

In general, bear markets occur when there is a widespread belief that financial markets will continue to decline. This can lead to a downward spiral as investors sell off their holdings to avoid further losses. While poor equity market conditions can be difficult for investors, they offer opportunities to buy assets at discounted prices. For this reason, some investors view bear markets as an opportunity to buy low and sell high.

Protect Against Today’s Crash:

What Is A Bull Market?

A bull market is a market in which prices rise or are expected to rise. The term “bull market” is often used to refer to the stock market, but it can also apply to other areas, such as real estate or art. A bull market typically starts when investors become optimistic about the future and buy more assets, driving up prices. This increase in demand can be due to several factors, such as increasing economic growth or falling interest rates.

The essential characteristic of a bullish market is that stock prices continue to rise even when there are setbacks, such as a recession or a Wall Street crash. This resilience makes bull markets challenging to predict; they can last for years or decades before eventually ending.

What Is A Recession?

A recession is a period of economic decline, typically lasting six months or more. During a recession, GDP (gross domestic product) shrinks, unemployment rises, and inflation decreases. Recessions can also lead to stock market crashes.

Stock Market Volatility History

The following video explains the history of the volatility in the United States going back to the Great Depression.

A 20-Year Stock Market Crash History

Over the last 20 years, three separate crashes have occurred. Two of those three notable crashes have prolonged recovery time to get American’s 401k plans back to the break-even point.

Educational Material: The Stock Market Volatility Guide

The Great Depression

The stock market crash of 1929 was a global event that sent shockwaves throughout the world economy. The crash began in the United States but quickly spread to other countries as investors scrambled to sell their assets. The crash signaled the beginning of the Great Depression, a prolonged period of economic decline that affected countries across the globe. In the United States, the crash led to mass layoffs, bank failures, and a sharp decrease in consumer spending. The Great Depression (the worst market crash in history) left a lasting impact on the world economy, and its effects are still felt today.

There are a few key factors that contributed to the causes of the 1929 stock market crash. Firstly, the market was significantly overvalued at the time. Secondly, there was a large amount of margin buying, which is when investors borrowed money to buy stocks. This can lead to a sharp price decline if investors sell their stocks. Finally, the Fed raised interest rates to control the stock market, which decreased demand for stocks.

Dotcom Bubble

The stock market downturn of 2002, also known as the Dotcom Bubble, was a bear market that lasted 2.5 years. For example, between March 25, 2000, and October 10, 2002, the S&P 500 dropped 49% in value, taking over seven years (October 10, 2007) to recover fully. Likewise, the Nasdaq stock prices fell an estimated 78.4% in 2002, taking 15 years to recover fully.

The Dotcom Bubble was a significant economic event during the late 1990s. It was characterized by a rapid increase in the value of internet-based companies, followed by a sharp decrease in those values.


Many people believe that the Dotcom Bubble was caused by investor speculation and unrealistic expectations about the potential of internet-based businesses. While there is some truth to this, it is also important to note that the Dotcom Bubble was fueled by many other factors, including the availability of venture capital, the proliferation of personal computers, and the introduction of new technologies such as broadband internet.

The Dotcom Bubble ultimately burst in 2000, leading to widespread economic loss and a decrease in the value of many internet-based companies. However, while the Dotcom Bubble was undoubtedly an adverse event, it also had some positive outcomes, such as developing new technologies and the emergence of several successful internet-based businesses.

Great Recession

Shortly after the S&P 500 had fully recovered from the Dotcom Bubble in 2007, the Wall Street crash of 2008 would occur. Between October 09, 2007, and March 5, 2009, the S&P 500 had lost 56.4% in value, taking roughly four years to recover to its previous high.

The financial crisis of 2008, also known as The Great Recession, would last 2.5 years, with an unemployment rate peaking at 10.6% and many Americans losing money in their retirement savings.


The Great Recession was a severe global economic downturn from 2008 to 2009. It was caused by several factors, including the housing bubble, the subprime mortgage crisis, and high oil prices. As a result, more than 4 million jobs were lost in the United States alone, and many more were lost worldwide. The recession significantly impacted the global economy and is often considered the worst economic downturn since the Great Depression of the 1930s.

The Great Recession began in December 2007, when the U.S. housing market collapsed. This was caused by several factors, including subprime mortgage lending, easy credit conditions, and speculative bubbles in the housing market. In addition, the housing market collapse led to a wave of foreclosures, which further contributed to the economic downturn.

In September 2008, Lehman Brothers, one of the largest investment banks in the United States, filed for bankruptcy. This event triggered a major financial and economic crisis, as credit markets froze and panic spread throughout the global financial system. Federal Reserve Banks bailed out the surviving banks and financial institutions to keep the economy afloat.

The stock market crash of 2008 had a significant impact on the global economy. In the United States, GDP growth turned negative in the fourth quarter of 2008, and the economy officially entered a recession in December 2008. The recessionary conditions lasted until June 2009, making it the most prolonged recession since World War II.

Many other countries were also affected by the Great Recession. For example, several European countries, including the United Kingdom, Germany, and France, entered into recession. Japan also experienced a recession in 2009.

The Great Recession had several adverse effects on individuals and families. First, unemployment rose sharply in many countries as companies laid-off workers in response to declining demand. This led to an increase in poverty and inequality and decreased consumer spending.

The Great Recession also had some adverse social and political effects. For example, the financial crisis led to the election of Barack Obama in the United States and the rise of populist parties in Europe. In addition, the recession caused several protests and riots worldwide, as people expressed their anger at the economic conditions.

The Great Recession was a major global economic event, one of the worst, and its effects are still felt today. It led to widespread unemployment, increased poverty and inequality, and decreased consumer spending. In addition, the recession had several adverse social and political effects, including the election of Barack Obama in the United States and the rise of populist parties in Europe.

2020 Stock Market Crash

The global stock markets fell the fastest between February 20, 2020, and April 7, 2020. Black Monday II’s highest daily drop of roughly 12% occurred on March 16, 2020. After that, the market quickly recovered, but volatility still happens in today’s climate leaving Americans wondering if the market will crash again.

What Happens To My IRA If The Stock Market Crashes?

When the market crashes, it can significantly impact your IRA. Your account value could significantly hit if you invest heavily in stocks. However, there are some things you can do to help protect your IRA from a crash.

Diversify Investments

One option is to diversify your investments. This means investing in different asset classes, such as bonds, real estate, and cash. This can help protect your IRA from crashes because not all asset classes will be impacted similarly.

Stop-Loss Orders

Another option is to use stop-loss orders. You can place these orders with your broker, that will automatically sell your investments if they fall below a specific price. This can help to limit your losses in the event the market falls.


Finally, you may want to consider rebalancing your IRA. This means selling some of your increased value investments and using the proceeds to buy other investments that have lost value. This can help you maintain a diversified portfolio and potentially reduce losses in a stock market crash.

While there’s no guaranteed way to protect your IRA from a stock market crash, these strategies can help you minimize the impact on your account.

Can You Lose Your 401(k) If The Market Crashes?

While a 401(k) can be a great way to save for retirement, it’s essential to understand how it works. Your 401(k) is invested in stocks, meaning your account’s value can go up or down depending on the market. If the market drops, you could lose money in your 401(k). This is why it’s essential to diversify your investments and not put all your eggs in one basket.

While you may lose money in the short term if the stock market crashes, over the long term, it’s more likely that the market will rebound, and you’ll be able to make back your losses.

How To Protect A 401(k) And IRA Before A Stock Market Crash

The saying goes, “Don’t Put All Your Eggs in One Basket,” which means not investing your retirement into just one type of investment. However, I believe the following advice I’m providing applies as well.

The goal to steadily grow a 401k or IRA is to diversify, and diversification can vary based on current age, retirement savings goals, risk tolerance, and a target retirement age. Diversifying in both aggressive and conservative investments will allow for a balance.

Where do you put your money before a stock market crashes?

Diversifying a portfolio requires a proactive mentality rather than a reactive mentality. The mental state during a bullish market can often lead to smarter decisions than an investor making decisions during a stock market decline.

Find conservative retirement savings plans to safely grow your retirement plan and protect the retirement plan in volatile times. Annuities are a great example of a conservative savings plan.

Where To Put My Money Before The Market Crashes?

Many people are worried about the stock market crash. They think their money will disappear overnight if they don’t put it in the right place. While it’s true that the stock markets can be volatile, there are some steps you can take to protect your money.

  • One option is to invest in bonds. Bonds are debt securities that governments and corporations issue. They typically have a fixed interest rate and a maturity date, which is the date when the bondholder will receive their money back.
  • Another option is to invest in gold. Gold is a precious metal that has been used as a store of value for centuries. As a result, it tends to hold its value during economic turmoil.
  • Finally, A fixed index annuity is an insurance product that offers a guaranteed rate of return, plus the potential for additional growth based on the performance of a stock market index. If the market crashes, your investment in a fixed index annuity will not decrease in value. The guaranteed rate of return provides a floor for your investment, and the index-linked growth potential gives you the market’s upside without the downside risk.

So if you’re worried about the stock market crashing, consider investing in bonds, gold, or indexed annuities.

How To Protect A 401(k) And IRA During A Stock Market Crash

If you haven’t been proactive in a stock market crash, don’t fret. When crash planning, a 401(k) or IRA owner can take a few options, waiting for the market to recover or moving the money into a conservative vehicle like a deferred annuity.

Most deferred annuities offer principal protection, which means you can’t lose money if the stock market takes a nosedive. Annuity owners either earn an interest rate or gain nothing (nor lose nothing). The annuity’s value stays the same.

The variable annuity and the registered index-linked annuity are the exceptions to this rule, and an owner can lose some or all of their money if the stock market plummets.

Recovery Tip: Fixed indexed annuities can offer a premium bonus for new customers. The bonus could recover money lost from the crash.

How To Protect A 401(k) And IRA After A Stock Market Crash

After a stock market crash, the 401k or IRA’s value is at a low point. Once again, the retirement plan owner can wait until the market recovers, which can take years, or they can take advantage of the bear market in a unique way.

Educational Material: The Power Of Protection

Fixed Index Annuities

Deferred annuities are among the safest 401k and IRA investments during a recession. Some consider it “retirement crash insurance.” A fixed index annuity can earn interest based on a market index’s positive performance (movement) without the risk exposure and lock in every gain made. This protection means three things:

  • Growing a 401k or IRA based on a positive movement of an index both in a bullish market and a bearish market
  • Keeping all the interest and never losing the gains
  • Tax-efficient investing by tax-deferral

The Benefits

  • Lock-In Gains: This means a fixed index annuity owner keeps all of their interest earned and never loses those gains in the future due to a crash. The technical term for this feature is called the Annual Reset.
  • Positive Movement of a Market Index: Fixed index annuities measure a particular stock market index’s performance (S&P 500, Nasdaq, Dow Jones Industrial Average) from one specific date to another, typically one or two years from each other. Interest can be earned even in a bear market if there is a positive movement between the two dates. The interest earned is based on the movement, not the daily value.
  • Negative Movement of a Market Index: If the index’s movement is negative, the annuity owner earns a “zero credit,” The annuity’s value stays the same as the previous year (minus any fees).

Earning interest based on positive movements and locking in gains means a fixed index annuity owner can grow their retirement plan during a recession as the bear market transitions to a bull market. In addition, achieving growth during the upward movement of an index means avoiding the recovery wait time an investor would have to endure if investing directly in the stock market.

How A Fixed Index Annuity Can Help

When saving for retirement, many people choose to invest in the market. While this can be a great way to grow your savings, it also comes with some risks. Equity markets is susceptible to volatility, leading to losses in your portfolio.

One way to help mitigate the volatility risk is to invest in a fixed index annuity. This type of annuity provides you with a guaranteed income stream for retirement, regardless of how the market performs. Additionally, fixed index annuities offer the potential for growth on your investment, giving you the best of both worlds – security and growth potential.

If you’re looking for a retirement savings strategy that can help you weather the ups and downs of the market, a fixed index annuity may be right for you.

Next Steps

The next crash is inevitable after 11 years of riding the longest bull market, and a bear market will come out of hibernation. So before you seek out an asset management or wealth management firm, know your options first.

It becomes a matter of how an investor prepares for the next crash and takes advantage of the next bear market or recession. Most deferred annuities are great vehicles to invest money, protect against a crash, and can grow a retirement plan during a bear market. In contrast, others endure another prolonged recovery period that could last for years. So, to request a quote to compare your options. Here’s to investing better!

Protect Your Retirement Savings Plan (Ira And 401K) From A Stock Market Crash And Recession

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Frequently Asked Questions

Can you lose money on stocks?

Yes, you can lose money on stocks. When the stock market goes down, the prices of individual stocks usually go down as well. However, you can also make money when the stock market falls by investing in stocks less affected by the market crash or rising in value.

Do you lose all your money if the stock market crashes?

Money in the market is at risk of loss, and a crash could lead to losing all of your money, depending on the type of investment.

What happens if your stocks go negative?

If your stocks go negative, you will lose money. However, you may still be able to make money if you have invested in stocks less affected by the market crash or rising value.

What is a stock market bubble?

A bubble is a period of time when stock prices are artificially high. This can happen when too much money is chasing too few investments, leading to a crash.

Why is the stock market crashing?

The increase in inflation and interest rates are the main reasons behind the recent stock market crash.

What’s the difference between a market correction and a market crash?

A market correction is a sharp but short-term decline in stock prices. A market crash is a more prolonged and significant decline in stock prices.

Where can I put my money before the market crashes?

For retirement savings such as a 401(k) or IRA, you may want to consider saving in a more stable investment, such as a short-term fixed annuity. With a fixed annuity, your money is guaranteed to grow at a set interest rate for a specific period, making it a safe investment choice during market downturns. Then, after the term is completed, move the retirement plan back into the market.

How do you protect money from a stock market crash?

You can do a few things to protect your money from a market crash. One is to invest in assets that tend to be less volatile, such as deferred annuities, bonds, or cash. Another is to diversify your portfolio to include different asset classes, which can help offset the losses in one sector with gains in another. Finally, you can use stop-loss orders to limit your downside risk.

What is the best thing to do when the market crashes?

The best thing to do when the market crashes is to stay calm and not panic. It can be tempting to sell all your stocks when the market is in free fall, but this is often the worst thing you can do. Instead, try to ride the storm and wait for the market to rebound. Many investors who panicked and sold during the last market crash regret it now that the market has recovered.

How do you protect your 401k before a market crash?

You can do a few things to protect your 401k before a market crash. First, one must ensure that you are diversified and not too heavily invested in one stock or sector. Another is to rebalance your portfolio so that it is more conservative. Finally, any old 401(k) plans from previous employers should be rolled over into an IRA or IRA annuity to have more control over how your money is invested.

What goes up when the stock market crashes?

There are a few things that go up when the market crashes. One is the price of haven assets, such as gold and silver. Another is the price of bonds, which tend to be less volatile than stocks. Finally, the price of put options usually increases since investors are looking for ways to hedge their portfolios.

Can you lose money in a Roth IRA?

Yes, you can lose money in a Roth IRA. Your investment choices within the account and market conditions will determine whether the value of your Roth IRA goes up or down. However, you can not lose money in a Roth IRA fixed index annuity.

What is the difference between a stock market crash and a recession?

A stock market crash is a sudden and sharp decline in stock prices. A recession is a prolonged period of economic decline. A market crash can happen during a recession, but it doesn’t necessarily cause one.

What is the difference between a depression and a recession?

Depression is a prolonged and severe recession. Depressions are characterized by falling asset prices, high unemployment, and low economic output.

Where should I put my IRA or 401(k) when crash planning?

A short-term fixed or fixed index annuity is an excellent option for an IRA because you are protected from market downturns. Then transfer the IRA back into an ordinary IRA once the stock market corrects. Although you can not move any current 401(k) plans, old 401(k)s from previous employers are fair game to transfer to an annuity.

Why is my 401(k) losing money?

There are a few reasons your 401(k) might be losing money. For example, maybe the stock market is crashing, or you have invested in a stock that is not doing well. Alternatively, your 401(k) could be losing value for other reasons, such as high fees or bad investment choices.

What should I do if my retirement account is losing money?

If your retirement account is losing money, you should contact us to see if there is anything you can do to stop the losses. You may also consider transferring your retirement account into a fixed or fixed index annuity. This will protect your principal investment from market downturns.

What are the safest investments for retirement?

The safest investments for retirement are those that will protect your principal investment from market downturns. Fixed and fixed index annuities are two great options.

Where should you put your money before a stock market crash?

There is no one-size-fits-all answer to this question. It depends on your circumstances and goals. However, some people may choose to transfer their retirement accounts into a fixed or fixed index annuity. This will protect your principal investment from market downturns.

How do I know if the stock market is going to crash?

There is no sure way to know if the stock market will crash. However, there are some warning signs that you can watch out for, such as soaring stock prices, low-interest rates, and high levels of debt. If you see these signs, you must be cautious with your investments.

What happens to bonds when the stock market crashes?

Bonds tend to be less volatile than stocks, so they may not lose as much value during a stock market crash. Additionally, if interest rates rise, bonds will become more valuable.

Will a recession follow inflation?

A recession is a prolonged period of economic decline. Inflation is when prices for goods and services rise. A recession can follow inflation, but it doesn’t necessarily happen.

How do I know if we are in a recession?

There are a few ways to tell if we are in a recession. One way is to look at the Gross Domestic Product (GDP), a measure of the economy. If GDP growth slows down or turns negative, we are in a recession. Another way to tell is by looking at the unemployment rate. If the unemployment rate starts to rise, it’s a sign that the economy is weakening.

What should I do if we are in a recession?

If we are in a recession, it’s essential to be careful with your money. You may want to save more and spend less. Additionally, you may want to invest in less risky investments, such as bonds rather than stocks.

Will a recession affect the stock market?

A recession can affect the stock market in a few ways. Firstly, a recession can cause a stock market crash. Secondly, a recession can lead to lower corporate profits, which may cause stocks to lose value. Finally, a recession can lead to higher unemployment, reducing stock demand.

Where do I invest during a recession?

There is no one-size-fits-all answer to this question. It depends on your circumstances and goals. However, some people may invest in less risky investments, such as bonds and fixed annuities, rather than stocks. Additionally, you may want to consider investing in companies less likely to be affected by a recession, such as utility companies.

How long does a recession last?

A recession can last anywhere from six months to two years. However, the economy typically takes about a year to recover from a recession.

What causes a recession?

A recession can be caused by various factors, such as high-interest rates, low consumer confidence, and high levels of debt. Additionally, a recession can be triggered by an event like a stock market crash.

What are the symptoms of a recession?

The symptoms of a recession can vary, but some common ones include high unemployment, low consumer confidence, and declining home values. Additionally, a recession can lead to lower corporate profits and increased bankruptcies.

How does a recession end?

A recession typically ends when the economy starts to grow again. Additionally, the federal government (federal reserve system) may take steps to stimulate the economy, such as lowering interest rates or increasing government spending.

How do you survive a recession?

There is no one-size-fits-all answer to this question. However, some things you may want to do during a recession include saving money, investing in less risky investments, and being careful with your spending. Additionally, you may want to consider finding ways to make extra money.

What should you not do during a recession?

During a recession, you may want to avoid making any significant financial decisions, such as buying a new home or car. Additionally, you may want to avoid taking on any new debt, such as a loan or credit card. Finally, you may want to avoid making any risky investments, such as stocks.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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