{"id":10327,"date":"2025-04-13T07:17:55","date_gmt":"2025-04-13T11:17:55","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=10327"},"modified":"2025-04-13T07:20:26","modified_gmt":"2025-04-13T11:20:26","slug":"its-hard-to-let-it-be-when-the-market-smashes-401k-accounts","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=10327","title":{"rendered":"It’s hard to ‘let it be’ when the market smashes 401(k) accounts"},"content":{"rendered":"
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Tariff-induced market sell-off ripped through 401(k) accounts, and, millions of savers and retirees took matters into their own hands.<\/div>\n<\/div>\n<\/div>\n
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People pulled vast sums of 401(k) money from large US equity funds and target date funds and shifted to more conservative stable value, bond, and money market funds, according to\u00a0Alight Solutions<\/a>\u2019 401(k) Index.<\/p>\n

Trading activity on Monday, April 7th, was almost 10 times an average day\u2019s volume, with investors fleeing stocks for the safety of fixed-income funds, Rob Austin, head of thought leadership at Alight Solutions, told Yahoo Finance. It was the highest daily trading level since March 2020 when the pandemic hit.<\/p>\n

Read on Yahoo Finance<\/a><\/em><\/strong><\/p>\n

Why the Monday meltdown? Historically, when stock markets have large losses on Fridays, very high trading activity in 401(k) plans follows on Monday, Austin said. People react to the news by tweaking their portfolios over the weekend, but those changes don\u2019t get executed until the market reopens.<\/p>\n

\u201cThe high volume isn\u2019t surprising as people tend to sell during market drops and buy back after rebounds, which leads to selling low and buying high,\u201d he said. \u201cSaving for retirement is a marathon, not a sprint and a long-term approach to investing is generally wiser, even if it means enduring occasional downturns.\u201d<\/p>\n

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Tell that to stressed-out investors and savers. They were all over the map.<\/p>\n

\u201cEngagement with the markets was high among Schwab’s retail clients last week,\u201d Alex Coffey, senior trading and derivatives strategist at Charles Schwab, told Yahoo Finance.<\/p>\n

More clients bought equities than sold, Coffey said. But in terms of dollar amounts, clients were net sellers \u2014 meaning the amount of money behind selling transactions was bigger.<\/p>\n

In terms of individual names, there weren’t many surprises. Nvidia (NVDA<\/a>) was the most-bought stock, followed by Amazon (AMZN<\/a>), Apple (AAPL<\/a>), and Tesla (TSLA<\/a>).<\/p>\n

\u201cWe also saw a lot of buying in index-tracking ETFs, perhaps as a volatility-driven alternative to investing in individual stocks where risk can be higher,\u201d Coffey said.<\/p>\n

Lindsay Theodore, a certified financial planner at T. Rowe Price, said not all her clients reacted the same way.<\/p>\n

\u201cSome see the volatility as an opportunity to redeploy cash that had been sitting on the sideline,\u201d she said. \u201cOthers are worried and seeking validation that they\u2019re in the right investments and on the right track.\u201d<\/p>\n

Read more:\u00a0<\/em>How to protect your money during economic turmoil, stock market volatility<\/em><\/a><\/p>\n

What financial experts are telling retirement savers<\/strong><\/h2>\n

You can remind people again and again to sit on their hands instead of making big moves to jettison their stock holdings during economic turmoil and stock market volatility, but human nature often takes over.<\/p>\n<\/div>\n

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At\u00a0TIAA<\/a>, retirement participant calls and online account logins jumped nearly 30% since April 3 as retirement savers sought answers.<\/p>\n

\u201cStay anchored\u201d was the advice from Niladri \u2018Neel\u2019 Mukherjee, chief investment officer at TIAA Wealth Management.<\/p>\n

He advised investors to stay diversified across equities, bonds, and cash holdings according to their risk profile. Raise some cash if you need it for immediate purposes. However, he urged investors to balance the need to remain invested in equities for growth during retirement years. Maintaining a long-term perspective is critical even in retirement.<\/p>\n

That\u2019s the tried-and-true advice we always hear, and I am an advocate for that approach myself. Yet any time the markets flip out it seems inadequate, and this sudden downward shift feels different.<\/p>\n

Fidelity was unable to share up-to-date figures on outflows and inflows from 401(k) and IRA accounts since Thursday, but I did get some calming predictions that could soothe rattled nerves.<\/p>\n

“Market volatility may remain in the short term, but our outlook for US stocks remains positive,” said Mike Scarsciotti, a certified financial planner in Fidelity\u2019s Capital Markets Strategy Group.<\/p>\n

A safe haven in the meantime are intermediate-term bonds, which can offer yield and diversification, he said.<\/p>\n

Read more:\u00a0<\/em>What are bonds, and how do you invest in them?<\/em><\/a><\/p>\n

Itching to do something? Make a financial plan.<\/strong><\/h2>\n

It\u2019s tough not to get twitchy and want to do something to take control of your retirement account when things take a turn for the worse.<\/p>\n

\u201cA dramatic emotional action like panicking and going all to cash and all to bonds is not a strategy,\u201d Rob Williams, managing director of financial planning at Charles Schwab, told Yahoo Finance. \u201cWe have seen increased calls with questions and concerns this week and increased angst,\u201d he said. \u201cThe tendency as an investor is to say, yes, I want to take cover.\u201d<\/p>\n

A better response is to take \u201cownership of your financial life,\u201d Williams said.<\/p>\n

That doesn’t mean \u201cset and forget it\u201d or not paying attention. Have an investment plan based on how many years you have until you really need those funds in retirement. \u201cIt can be very simple, but having a plan is an active move,\u201d Williams said.<\/p>\n

Be aware of your emotions and concerns when there’s uncertainty, he added, and create a plan you can stick to.<\/p>\n

That means if your time horizon is more than three or four years, you stick with the plan even through the turmoil, Williams said, \u201ccontinuing to save, continuing to invest, and rebalancing your portfolio once a year.\u201d<\/p>\n

\u201cAll of our studies show that people who have a financial plan tend to feel more confident or are looking for opportunities in a down market like this more than they are panicking or making emotional decisions that may end up not helping them in the long term,\u201d he said.<\/p>\n

\u2018Let It be\u2019<\/strong><\/h2>\n

When you see in big red letters that your stocks are losing money, it’s hard to not react, Benedict Guttman-Kenney, an assistant professor of finance at Rice University, told me.<\/p>\n

The common thinking: The stock market’s falling. I want to get out before it falls further, and I lose more money.<\/p>\n

\u201cBut a fantastic way to lose money is to sell in a panic,\u201d Guttman-Kenney said. \u201cIt is a bit cheesy, but when I think of this behavior, I remember the Beatles\u2019 hit \u2018Let It Be.\u2019 That\u2019s what most people need to do, and it’s very hard.\u201d<\/p>\n

A valuable nugget to consider: If you\u2019re saving automatically in your employer-sponsored retirement plan, or you\u2019re making automatic contributions to a Roth IRA or a traditional IRA and are years from retirement, you\u2019re always investing in your retirement accounts regardless of whether markets are up or down. That evens out your returns over the long haul as you roll through the changing tides.<\/p>\n

Moreover, many retirement savers these days have their funds set aside in target-date retirement funds which automatically shift when the markets go haywire.<\/p>\n

\u201cTarget-date funds are a great solution for many retirees, especially 401(k) plan accounts,” Schwab\u2019s Williams said. \u201cIf you want a default solution, that’s the right place to start. It will help you stay the course through dips and downturns like this because they rebalance your portfolio periodically.\u201d<\/p>\n

Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.<\/em><\/strong><\/a><\/p>\n

And heed this message from Guttman-Kenney: \u201cThe stock price movements over an hour, a day, a week, a month \u2014 those really shouldn’t be affecting those long-run decisions,\u201d he said.<\/p>\n

\u201cDo whatever kind of self-control mechanism works for you. Take a walk if that helps.”<\/p>\n

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