What Is A Stock Market Crash, And Is My Retirement Safe From It

Shawn Plummer

CEO, The Annuity Expert

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. A drop in the market can lead to a recession.

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 401k If The Market Crashes?

While a 401k can be a great way to save for retirement, it’s essential to understand how it works. Your 401k 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 401k. 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 401k 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 of steadily growing 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.

How To Diversify 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 401k 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 401k 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.

Stock Market Crash

How To Protect A 401k 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 using fixed-indexed annuities.

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.

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

Stock Market Volatility History

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

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!

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Frequently Asked Questions

Why are the markets down today? What are the causes?

The reasons for the stock market to be down can vary, and various factors can cause it. Some reasons could be based on economic indicators such as rising interest rates, high inflation, or a recession. Political uncertainty, natural disasters, or a crisis in a specific industry could also cause it. It’s hard to say why the markets are down today without more information about the current situation and context.

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.

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.

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 401k 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.

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 401k 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.

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.

Where should I put my IRA or 401k 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 401k plans, old 401ks from previous employers are fair game to transfer to an annuity.

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.

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 is a stock market crash recession?

A stock market crash recession refers to a period of economic decline characterized by a sudden and significant drop in stock prices. It usually leads to reduced consumer spending, layoffs, and a decline in business activity. The effects can be severe and can last for an extended period, impacting various sectors of the economy.

What happens if the stock market crashes?

A stock market crash occurs when stock prices decline rapidly, often leading to a severe economic downturn. If the stock market crashes, investors may experience significant losses as the value of their investments declines. This can have a domino effect on the economy, leading to job losses, reduced consumer spending, and a general decline in economic activity.

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.

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 happens to my IRA if the stock market crashes?

The value of your investments will go down. You can consider diversifying your portfolio, you can also consider investing in a fixed index annuity. This type of annuity offers guaranteed income for life, no matter what happens to the stock market.

Why am I losing money in the stock market?

There are a few reasons you might lose money in the stock market. The most common reason is that the economy is slowing down, and investors are worried they won’t be able to make money in the future. Other reasons include political uncertainty, inflation, rising interest rates, and unexpected events (like the pandemic).

Are annuities safe in a recession?

Investing always involves some level of risk. When the market crashes, annuities behave differently depending on their type. For example, fixed annuities, with a guaranteed interest rate, are unaffected by market downturns.

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

If the stock market crashes, investors may experience significant losses, but it does not necessarily mean they will lose all their money. Diversifying investments, setting stop-loss orders, and having a long-term investment strategy can help mitigate potential losses during a market downturn.

Can I lose my 401k if the market crashes?

No, you cannot lose your 401k if the market crashes. The funds in your 401k are invested in various assets, including stocks, which can experience volatility during a market downturn. However, your 401k remains intact, and its long-term performance depends on the recovery of the market over time.

Can the government take your 401k during a recession?

During a recession, the government generally does not have the authority to seize an individual’s 401k account. However, in extreme circumstances, they may consider imposing restrictions or implementing temporary measures to protect the overall stability of the economy. It is always recommended to consult a financial advisor for personalized advice regarding 401k accounts during recessions.

Should I keep investing in my Roth IRA during a recession?

During a recession, it’s generally recommended to continue investing in a Roth IRA. Although stock prices may dip, investing consistently over time allows you to take advantage of buying shares at lower prices. Over the long term, the market tends to recover and grow, potentially resulting in higher returns for your retirement savings. However, consult with a financial advisor to tailor your investment strategy to your specific goals and risk tolerance.

What goes up when the stock market crashes?

When the stock market crashes, investors often turn to safe-haven assets such as gold and government bonds. The demand for these assets increases as people seek to protect their investments from market volatility. As a result, the prices of gold and government bonds tend to rise during a stock market crash.

What do experts recommend on what to own when the dollar collapses?

In case of a potential dollar collapse, experts recommend diversifying one’s investment portfolio with assets that retain value amid economic uncertainty. Examples of what to own when the dollar collapses include precious metals like gold and silver, cryptocurrencies like Bitcoin, real estate, and foreign currencies such as the Swiss Franc or the Japanese Yen. It is advisable to consult financial advisors for personalized guidance.

How does the NASDAQ affect my 401k?

The NASDAQ is one of the major stock exchanges in the US, and its performance can impact your 401k investments. As the NASDAQ rises or falls, the value of the stocks in your 401k portfolio may also be affected. This means that if the NASDAQ performs well, it could potentially increase the value of your 401k, while a decline could lead to a decrease in your retirement savings.

Can I freeze my IRA account?

Yes, individuals can freeze their IRA accounts, although it is not a commonly practiced option. Freezing an IRA account essentially means ceasing any activity and preventing new contributions or withdrawals. This could be done for several reasons, such as protecting the account during a volatile market or while undergoing legal proceedings. However, it is recommended to consult with a financial advisor or tax professional before considering this option.

Should I move 401k to cash during a recession?

During a recession, it is not advisable to move a 401k to cash. This is because the market tends to recover in the long term, and timing the market is difficult. Instead, experts recommend staying invested and diversifying your portfolio to reduce risk. It’s always best to consult with a financial advisor before making any investment decisions.

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed insurance agent and annuity broker with over a decade of first-hand experience. 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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