Recent market volatility has many retirement plan participants on edge. President Trump’s announcement of reciprocal tariffs on global trading partners on Wednesday, April 2, 2025, has intensified concerns, with roughly $2.4 trillion erased from the S&P 500 Index following the Wall Street selloff on Thursday, April 3, 2025, according to a recent BenefitsPro article.
Even before the tariff announcement, the first quarter of 2025 saw high trading activity in retirement plans. The Alight Solutions 401(k) Index reported that March 2025 was the most active month for retirement plan trading since 2020. According to Alight, 401(k) balances fell by approximately 7% over Thursday and Friday (April 3-4, 2025) following the announcement. Still, that’s notably less than the broader stock market decline, thanks to the diversification provided by bonds and cash holdings in these accounts.
Treasury Secretary Scott Bessent addressed these concerns on NBC’s Meet the Press on Sunday, April 6, 2025, noting that most Americans in 401(k) plans have what’s called a “60/40 account” (60% stocks and 40% stable investments like bonds). These accounts are currently down about 5-6% for the year. While acknowledging investors’ short-term anxiety, Bessent emphasized the long-term nature of these investments: “People have a long-term view… If you look day-to-day, week-to-week, it’s very risky. Over the long term, it’s a good investment.”
The consensus among financial experts is clear: This is not the time to panic. BenefitsPro aggregated commentary from various publications, including Time magazine, The Washington Post, and USA Today, providing a comprehensive view of expert opinions on the market situation.
Brad Clark, founder and CEO of Solomon Financial, used an apt metaphor in Time: “When you’re flying somewhere and you’re in the worst turbulence you’ve ever been in, all you can think is, ‘I’ve just got to get off this plane.’ But the plane was built to handle this. That’s kind of like your portfolio.”
Washington Post columnist Michelle Singletary similarly advised investors to “go ahead and panic… but don’t look at your portfolio” and to keep investing. She emphasized the importance of not acting on fear, particularly for investors with a long investment horizon.
Many Americans follow a “dollar-cost averaging” investment strategy, contributing fixed amounts to their retirement accounts at regular intervals regardless of market performance. Sarah Behr, registered investment advisor and founder of Simplify Financial Planning, confirmed in USA Today that continuing to invest in a 401(k) “is the right thing to do,” especially for younger investors with decades until retirement.
For plan sponsors and advisors, this period of volatility presents an opportunity to reinforce fundamental investment principles with participants:
- Emphasize the long-term nature of retirement investing
- Highlight the benefits of diversification to help weather market turbulence
- Remind participants that market drops are normal and expected
- Caution against emotional decision-making during volatile periods
Mark Williams, a risk-management expert from Boston University quoted in USA Today, warned against the most counterproductive response: panicking and withdrawing money from retirement accounts. He advised against daily monitoring of retirement accounts, instead encouraging investors to view their investments as part of a long-term strategy designed to withstand market corrections.
For plan sponsors, now may be an ideal time to offer additional educational resources or webinars addressing market volatility. For advisors, proactive communication with clients to reinforce these principles can help prevent panic-driven decisions that may derail long-term retirement outcomes.
As plan sponsors and advisors, acknowledging participants’ genuine concerns and anxiety during market downturns is important—these feelings are natural and valid. At the same time, gently guiding them to understand that their 401(k) plans contain built-in safeguards against market extremes—particularly through that 60/40 stock and bond allocation many utilize—strikes the right balance between emotional support and sound financial guidance. This empathetic yet educational approach is perhaps the most valuable service we can provide during turbulent times.
