Many investors across the country are seeing significant declines in the value of their 401(k) accounts, and for many Northrop Grumman Savings Plan participants it’s no different. As you review your next quarterly Savings Plan statement, here are a few things to keep in mind.

Know the Difference Between “Paper Losses” and “Real Losses”

It can be tempting to focus on what the value of your Savings Plan account was three months ago versus what it is today. Keep in mind that a loss on paper is just that—a paper loss. A loss on paper doesn’t become a “real” loss until you lock it in—in other words, you sell your investment.

Think of it this way: If the value of your house drops, have you really “lost” anything? You still own a valuable asset—one that has the potential to increase in value in the future. The value of an investment portfolio is no different.

It is not unusual for investments to rise and fall in value. If you are 10 or more years from retiring, you may have time to ride out the current economic downturn and give your investments the opportunity to regain value. In the meantime, it’s important to continue to take advantage of the opportunity to invest in the Savings Plan and to receive company matching contributions (if eligible).

If you are near retirement, it’s important to keep in mind that the Savings Plan is intended to supplement your other retirement benefits (such as any company-provided pension benefit, Social Security, and personal savings). With careful planning, you may not need to withdraw money from your Savings Plan account right away when you retire or, if you do, you may be able to keep the amount you withdraw to a minimum. You may want to consider meeting with a financial advisor to discuss your personal situation and get advice on how to manage your investments in the current economic climate.

Keep Your Eye on Your Goal

As you review your quarterly statement, keep your long-term retirement goal in mind. Although stock investments have historically been volatile, they have also provided the highest potential returns. Conventional wisdom is that if you want the value of your Savings Plan investments to outpace inflation, you should invest a portion of your account in stocks. However, it’s also important to have a diversified portfolio. Spreading your investment dollars among a variety of investments—including stocks, bonds, and cash equivalents—has historically been the best way to maximize your returns while minimizing your risk. If your Savings Plan portfolio isn’t well diversified, this is a good time to consider spreading your future contributions among a variety of asset classes. If you are not sure how to build a diversified portfolio, you can let a professional do it for you by investing in a Retirement Path portfolio.

We’ve all heard the adage “buy low, sell high.” When the stock market declines, many solid, well-run companies see their stock prices suffer along with the rest. This creates an opportunity for investors to purchase shares of great companies at a “discount.” Now may be a great time to consider investing new contributions in investment funds that focus on blue chip stocks, such as the U.S. Equity Fund or International Equity Fund.

Your Savings Plan offers you the opportunity to take advantage of another “bargain”—an automatic return on your investment if you participate in a sub-plan that offers company matching contributions. (See page 25 of the Summary Plan Description for details.) As you review your quarterly Savings Plan statement, take a look at how those company matching contributions add up. That’s money you wouldn’t have if you hadn’t participated in the Savings Plan. Don’t miss out on future “free money” from the Company—and make sure you contribute the amount necessary to receive the full company matching contribution. 

This Investment Center includes links to tools and information provided by organizations that are not associated or affiliated with Northrop Grumman. The tools and information provided by these organizations are not the property of Northrop Grumman, and Northrop Grumman is not responsible for their accuracy, completeness, or continued availability. You are solely responsible for the investment and asset allocation decisions you make pertaining to your personal savings and investments, including investments in the Northrop Grumman Savings Plan, Financial Security and Savings Program, and any other savings plans sponsored by Northrop Grumman.