An IRA losing money is unsettling, but it happens to nearly every retirement investor at some point. The right response depends on why your account is dropping, how far you are from retirement, and whether your current investments still make sense for your goals. In most cases, the best move is not to panic-sell, but to take a few deliberate steps to understand the loss and position your portfolio for recovery.
Figure Out Why Your IRA Is Losing Money
Before you change anything, determine whether your losses are coming from a broad market downturn or from specific investments underperforming. These are very different problems with very different solutions.
If the entire stock market is down and your IRA has dropped a similar percentage, your portfolio is doing what it’s supposed to do: tracking the market. Stocks don’t go up every year, and temporary declines are built into the deal. A diversified index fund will recover when the market recovers, even if the timing is uncertain.
If your account is falling faster than the overall market, something else is going on. You may be heavily concentrated in a single stock, a narrow sector, or a fund that’s simply performing poorly. From 1980 to 2020, 40% of individual stocks within a diversified index lost 70% of their peak value, according to Fidelity’s research. A single stock can carry roughly three times the volatility of a diversified index. So if your IRA is built around a handful of individual positions, that concentration alone could explain outsized losses.
Log into your account and compare each holding’s performance against a broad benchmark like the S&P 500 or a total stock market index. If one or two positions are dragging everything down while the rest are in line with the market, you’ve found your problem.
Check What You’re Paying in Fees
Fees eat into your returns every year, but the damage is especially visible during a downturn. When your investments earn 8% and you pay 0.5% in fees, you barely notice. When your investments lose 5% and you’re still paying 0.5%, the loss feels deeper because fees never take a year off.
The expense ratio on a low-cost index ETF can be as low as 0.03%. Actively managed funds commonly charge 0.5% to 1.5%, and some specialty ETFs exceed even that. On a $100,000 portfolio earning 4% annually over 20 years, a 0.5% expense ratio costs you roughly $20,000 in lost growth. A 1.5% expense ratio costs more than $55,000 over the same period, according to Schwab’s calculations. If your IRA holds high-fee funds that aren’t outperforming cheaper alternatives, switching to lower-cost index funds is one of the simplest ways to improve your long-term results.
Also check whether your IRA provider charges account maintenance fees, advisory fees, or trading commissions. Many brokerages have eliminated these, so if you’re still paying them, it may be worth moving your account.
Rebalance Instead of Bailing Out
A market drop often throws your asset allocation out of whack. If you started the year with 70% stocks and 30% bonds, a sharp stock decline might leave you at 60/40 without you doing anything. That shift means your portfolio is now more conservative than you intended, which could slow your recovery when stocks rebound.
Rebalancing means buying or selling investments to get back to your target mix. There are two common approaches. Calendar-based rebalancing means you check and adjust on a set schedule, such as once a year or once a quarter. Threshold-based rebalancing means you adjust whenever your allocation drifts more than a set percentage (say 5%) from your target. Either method works, and combining them is fine too. The important thing is having a plan you actually follow.
Inside an IRA, rebalancing is especially painless because buying and selling within the account doesn’t trigger any taxes. You can shift from bonds into stocks (or vice versa) without worrying about capital gains. If you’re 73 or older and taking required minimum distributions, you can use those withdrawals as a rebalancing tool by pulling from whichever asset class is overweight.
Keep Contributing During the Downturn
This is counterintuitive, but continuing to put money into your IRA while it’s losing value can work in your favor over time. The strategy is called dollar-cost averaging: by investing a fixed amount on a regular schedule, you automatically buy more shares when prices are low and fewer when prices are high. That lowers your average cost per share over time.
Think of it this way. If you contribute $500 a month to a fund that normally trades at $50 per share, you buy 10 shares. If the fund drops to $25, the same $500 buys 20 shares. When the fund eventually recovers, those extra shares bought at the lower price amplify your gains. You don’t need to time the bottom perfectly. You just need to keep investing consistently.
If you’re decades from retirement, a downturn is actually an opportunity. The shares you buy at depressed prices have the most time to grow. Stopping contributions during a decline locks in the damage by ensuring you miss the cheapest buying window.
Revisit Your Asset Allocation
If watching your IRA drop is causing real anxiety, your portfolio might be too aggressive for your risk tolerance or your timeline. A 25-year-old with 90% in stocks has decades to ride out volatility. A 58-year-old with the same allocation is taking a much bigger gamble.
A common starting framework is to hold a stock percentage roughly equal to 110 minus your age, with the rest in bonds or other stable assets. That’s not a rigid rule, but it illustrates the principle: as you get closer to needing the money, you gradually shift toward less volatile investments. If you’re within five to ten years of retirement and your IRA is almost entirely in stocks, the current downturn is a signal to rethink that mix, not to sell everything, but to move toward a more balanced allocation that you can stick with through future drops.
If you’re further from retirement, resist the urge to move everything into bonds or cash. Inflation will erode the purchasing power of an overly conservative portfolio just as surely as a market crash erodes an aggressive one. The goal is finding the mix that lets you sleep at night while still growing enough to fund your retirement.
Understand What You Can’t Do on Taxes
One thing you cannot do is claim a tax deduction for losses inside your IRA. Unlike a regular brokerage account, where you can sell losing investments and use those losses to offset gains (a strategy called tax-loss harvesting), an IRA doesn’t allow this. The IRS treats IRA contributions and withdrawals as the taxable events, not the individual trades within the account. Your investments can go up and down inside the IRA without any tax consequences until you take money out.
For Roth IRAs specifically, there was once a provision allowing you to deduct losses if you closed all your Roth accounts and your total withdrawals were less than your total contributions. That deduction was eliminated after the 2017 tax year and is no longer available. The practical takeaway: selling a losing investment inside your IRA to “capture the loss” for tax purposes accomplishes nothing. If you’re going to sell, do it because the investment itself is wrong for your portfolio, not for a tax benefit that doesn’t exist.
When Selling Actually Makes Sense
Staying the course doesn’t mean ignoring genuine problems. It makes sense to sell a holding in your IRA when the investment itself is flawed, not just because the market is down. Red flags include a fund that consistently trails its benchmark over three to five years, an expense ratio significantly higher than comparable funds, heavy concentration in a single company or sector you didn’t intend, or a fund whose strategy no longer matches your goals.
If you sell, reinvest the proceeds into something better aligned with your plan. Moving to cash and waiting for the “right time” to get back in rarely works. Studies consistently show that missing just a handful of the market’s best days, which often cluster near the worst days, can dramatically reduce long-term returns. The goal is to stay invested in the right things, not to time the market’s movements.