By now you have probably heard of the Greek debt crisis and the failure over the weekend of the negotiations between the Greek government and its creditors to avert a potential default on its loans from the IMF that are due on June 30.

Stocks around the world opened for trading on Monday with moderate to steep declines while the stock market in Greece was ordered closed. Many US investors are wondering what impact the Greek debt crisis will have on their 401k plans? In order to answer this question we have to understand the two potential consequences that this crisis will have on your 401k: direct and indirect exposures.

Direct Exposure

There are hardly any direct consequences on our 401k from what is going on in Greece. Greek stocks and bonds are the most impacted by the crisis in Greece. The next most affected group would be stocks and bonds of European companies, particularly in those countries that either do a lot of trading with Greece or are creditors of Greece and Greek entities in general. Unless you have the entire funds in your 401k allocated to European funds then you should have little to worry about. Recall that your 401k funds are invested in various mutual funds that own stocks or bonds in different companies and in different countries. Here in the US, there are no mutual funds that are exclusively dedicated to investing in Greece but there is an exchange traded fund that does. So if you happen to have a significant portion of your 401k invested in this ETF (Symbol: GREK) then you are down about 15% on that holding alone just today.

Indirect Exposure

While you may have little or no mutual funds that invest in Europe, and to a lesser extent in Greece in your 401k plan, you do have potential indirect exposure to what is going on in Greece simply because this crisis creates a lot of uncertainty for global investors and uncertainty usually brings on volatility to global stock markets and the US markets are not immune to that. It is hard to quantify the magnitude of potential losses in US markets specifically attributable to the Greek debt crisis but the fact is that US markets are less intertwined with the Greek economy than those in Europe should give us a gauge of potential losses and should signal that any losses in the US will be smaller than those in Europe.

What should 401k Investors do now?

The best thing you can do now is to actually log in to your 401k account and see what your current 401k allocation is. This is even more important if you have not done so in 6 months or more. If your 401k is properly diversified and appropriately allocated for your age and risk tolerance then chances are it will be less impacted by any single event such as Greece or otherwise. You can get free 401k allocation models right here.