As many people around the world are trying to wrap their minds around what just happened in Britain, you may also be wondering "What does the Brexit mean for my money?"
If you are worried about your 401(k), take heart. Most experts say you shouldn't rush to sell stocks and some even say it's an opportunity to buy. And, bonus for those looking to borrow: rates may fall.
Yes, things are going to be bumpy, but this is a time to stay calm and carry on.
STOCKS AND RETIREMENT
Investors with heavy investments in the U.K. and Europe may have felt a sting Friday. U.S. stocks fell more than 3 percent but some European indexes fell over 12 percent.
Market experts say the initial market reaction was largely emotional. But they noted that Britain's separation from the EU could take several years to play out and urged investors not to sell out of fear. And some said investors may even want to take advantage of the dip to buy.
"For the typical U.S. investor this is not really going to change anything," said Jurrien Timmer, director of global macro for Fidelity Investments. "It's not going to affect the U.S. economy, it's not going to tip us into recession."
Expecting the worst, Robien Christie of Fort Worth, Texas, checked his 401(k) Friday morning for the first time in months.
"I was actually surprised," the 25-year old said. "I thought it would be bad but it's still positive for the year."
He won't be touching his 401(k), but may put money into the British pound and into buying some stock in British companies as potential long-term investments.
Others, meanwhile, said they weren't ready to face the impact.
"I just don't want to know right now," said Leah Jones of Chicago.
The 39-year-old remembers sitting at her desk checking her retirement account when market crashed in 2008. She didn't want to relive that but plans to face it soon: She will call her financial adviser next week for some advice.
Understandably, it was a day for worry for many.
The VIX, known as the fear index, jumped from 17 to 25 Friday. That is far below the high of 80 it reached in October 2008 in the weeks that followed the collapse of Lehman Brothers.
"I think that things will work out over the long term. This isn't done in the short term ... the disappointment will roil the markets for a while," said John Manley, chief equity strategist at Wells Fargo Funds.
Whether it's the downturn in the stock market or the increase in global uncertainty, these events are a reminder of the need for a thoughtful financial plan, said Mark Hamrick, senior economic analyst for Bankrate.com. That means setting aside adequate savings and having a diversified portfolio.
If you don't have a financial adviser, look for information on the right investment choices for you with your retirement plan company.
"You need to have a plan that makes sense for you and you need to stick to that plan and that includes not freaking out when something like this happens," Timmer said.
INTEREST RATES
The Federal Reserve has been slow to raise interest rates due to concerns over global economic instability, and the U.K. vote makes it even less likely the Fed will act soon.
That's bad news for savers but great news for borrowers, particularly those looking to get a new mortgage or refinance.
Anxious investors seeking the relative safety of U.S. bonds sent prices for the 10-year Treasury note sharply higher. In turn, that pulled the yield on the notes lower Friday. Because long-term mortgage rates tend to track the yield on notes, mortgage rates may fall further.
"Mortgage rates are tumbling now and they're approaching record-low levels," said Greg McBride, chief financial analyst at Bankrate.com. "If you're a borrower, don't wait to lock your rate as this opportunity may not last long."
The average 30-year fixed-rate mortgage edged up this week to 3.56 percent from a 52-week low of 3.54 percent last week. How far rates drop and how long they stay there depends on the extent to which investors remain jittery.
"If markets bounce back next week, mortgage rates will too," McBride said. "But if the sell-off continues, mortgage rates will continue to fall."
The prospect of a drop in mortgage rates has some homebuyers shifting gears.
Zack Moore of Beaumont, California, says that, before Friday, he was ready to get prequalified on a home loan right away. But now he's going to hold off so that he can make sure to lock in a lower rate.
"If I see them drop at all, I may strike, I may try to wait a little while," said Moore, 41.
The Brexit could also indirectly benefit other borrowers if the Fed holds off on raising the central bank's key benchmark interest rate. When that rate goes up, it can raise short-term borrowing costs for banks, and that can ultimately lead to higher rates on things such as credit cards, home equity loans and credit lines. - usnews
Note - 401(k) Plan is a defined contribution plan where an employee can make contributions from his or her paycheck either before or after-tax, depending on the options offered in the plan. The contributions go into a 401(k) account, with the employee often choosing the investments based on options provided under the plan.
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