by Nahlah Abdur-Rahman
April 7, 2025
Although the stock market plunge has many eager to pull from their 401(k)s, some financial experts suggest the contrary.
As Trump’s tariff plans launch a trade war and a plunge in the stock market, safeguarding one’s finances remains the priority.
Trump’s tariffs across continents have led to a free-fall in the markets, with investors seeing the S&P 500 and Dow reach new levels in the red. The benchmark S&P 500 index lost over 300 points when the markets closed on April 4.
Amid the stock market crashing and the ongoing “recession indicators,” retirement funds remain vulnerable to a significant dip. This uncertainty can lead many people to think they should pull their money out of their 401(k) accounts.
However, financial advisors suggest that this may not be the right play and that a rushed move could result in an even worse outcome. Advisors shared with Fortune that investors should tread away from the panicked frenzy and ride out their investments until the market waters calm.
“Resist the urge to shift out of stocks entirely,” Christine Benz, a director of personal finance and retirement planning for Morningstar, a financial markets research firm. “Such a move could buy you some short-term relief, but it will soon be replaced by another nagging worry: Is it time to get back in?”
For young professionals who are not near retirement age, risk management experts think that the stock market is still their oyster. Taking advantage of lower prices now could lead to bigger gains in the long term.
“When you are in your 20s, that’s the most time you have until retirement that your money can grow,” explained Mark Williams, a risk-management practitioner and lecturer at Boston University, to Yahoo Finance. “It’s really the best time to invest in stocks.”
Given one may have decades of paying into their 401(k), leaving it alone will offer recovery time from the turbulent market. Moreover, pulling out funds usually comes with an early withdrawal penalty for those younger than 59 and a half.
For Williams, a retirement account should be stored away in the back of someone’s mind, as daily worries about the ebbs and flows will take away from the long-term satisfaction.
“Market drops test investor resolve,” he said. “It is counterproductive to look at your retirement account daily. Instead, view your investments as part of a long-term strategy that will overcome market corrections, grow and support retirement.”
Experts think placing funds in conservative investments may yield better results for those a little closer to retirement, especially in crunch time. Backing out of the more shaky indexes for bonds and cash will help those on their way out of the workforce.
“I would still say they should be saving. Should they be investing in an S&P 500 index? Maybe not,” suggested Sarah Behr, a registered investment advisor. “Say you’re 63 and plan to retire in five years. You should already be shifting to more conservative investments.”
However, if one still feels shaky about their heavily U.S.-based investments, another advisor suggests looking into international stocks. Maintaining diverse stocks in an investment portfolio ensures a country’s holdings won’t result in record-breaking 401(k) lows.
“There is no way to go back and change your portfolio in the past, you can only plan how to manage it in the future,” says Stephen Kates, a certified financial planner and financial analyst at Bankrate. “Invested money should never be at risk of needing to be withdrawn in the short term. Investors with ample time to stay invested should remember how lucrative patience has been over the last 15 years.”
Other tips include converting one’s traditional IRA to a Roth IRA to pay taxes when the balance is smaller and using buffer ETFs to limit losses. However, a huge proponent of mitigating risk while a trade war and recession feel imminent is to spend conservatively. Even if one’s 401(k) remains untouched, tightening a budget can help keep one afloat amid economic uncertainty.
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