February wasn’t the kindest month for retirement savers.
The tech-heavy Nasdaq Composite (^IXIC) fell nearly 4%. The S&P 500 (^GSPC) and the blue-chip Dow Jones Industrial Average (^DJI) dropped roughly 1.5%.
Amid all that market turmoil, 401(k) participants hustled to safety, fleeing from equity funds to fixed-income investments, according to a new report that tracks the inflow and outflow from 401(k) plan account holdings. For about half of the month’s trading days, trading activity was above normal, according to the Alight Solutions 401(k) Index.
People pulled 401(k) money from company stock, large US equity funds, and target-date funds and shifted to stable value, bond, and money market funds.
“These are historically less risky than equity funds,” Rob Austin, head of thought leadership at Alight Solutions, told Yahoo Finance. “So the move to them could signal that people are preferring to have lower volatility in their portfolios.”
Lower volatility? As if.
Millions of workers are edgy about losing their jobs or are already dealing with a layoff. There are percolating worries over economic growth hitting the brakes, tariffs on Canada, Mexico, and China ratcheting up inflation, a warning about “World War III” to Ukrainian President Volodymyr Zelensky in an angry Oval Office meeting.
The former head of the Social Security Administration is cautioning that the agency could be at risk of missing payments to seniors for the first time in its history thanks to the massive staffing cuts planned by the Trump administration. And deeper concerns about the future of Social Security and Medicare and Medicaid benefits are ominously hovering.
Meanwhile, consumer confidence sank in February, the biggest monthly decline in more than four years.
Life is coming at us fast, and, if you’re like me, you’re anxious.
I asked several financial advisers what they’re telling their clients about managing their money in these uncertain times.
Read more: What is a financial adviser, and what do they do?
“Market swings are normal, but they don’t always spell trouble,” Lisa A.K. Kirchenbauer, senior adviser and founder of Omega Wealth Management in Arlington, Va., told Yahoo Finance.
“While much is still yet to be played out, the uncertainty and discomfort is growing,” she said. “Depending on where you are in life: working, pre-retirement, retiring, or retired for a while, these potential shifts are raising a number of short- and long-term questions.”
The most important question we can ask, Kirchenbauer said, is: “What are you most concerned about?”
Knowing what the real concerns are for you and your family is critical, Kirchenbauer said. “Then you can think about what action you can take to navigate through it — if anything.”
Sometimes the best strategy is to simply sit on your hands.
“Volatility is often just noise,” she said. “Staying invested and making strategic adjustments, rather than reacting emotionally, leads to stronger long-term results.”
Savers need to have “a disciplined approach to wealth management,” Lazetta Rainey Braxton, a financial planner and founder of The Real Wealth Coterie, told Yahoo Finance “The political actions we continue to witness inform, rather than dictate, our economic and investment decisions.”
One priority right now is to have a cash “cushion account,” she said. “This is a critical safeguard to help you navigate inflation, job transitions, sabbaticals, and unexpected opportunities. These reserves provide stability and flexibility in an ever-changing geopolitical and economic environment.”
Braxton monitors stock and bond markets — both domestically and internationally — through the lens of geopolitical and economic developments, yet her investment philosophy is simple. Stay centered on long-term, wealth-building through passive index investing and diversification — a mix of US and international stock and bond funds, as well as real estate.
Focus on long-term goals. (Getty Creative) ·AndreyPopov via Getty Images
How many years until you plan to retire? That number is key in the moves you make now.
“The mistake a lot of people make is selling out of positions when the market is lower,” John Anderson, a certified financial planner at Equitable Advisors, based in Chicago, told Yahoo Finance. “If there are still several years until retirement, and you’re an individual that might be doing the bulk of your retirement savings in a vehicle through your employer like a 401(k), continue to do those systematic investments while the market is down because you are going to be buying shares more cheaply before the market rebounds.”
Anderson is spot on.
If you’re investing money automatically in your employer-sponsored retirement plan or an IRA, you’re investing when the market is ripping and when it’s tanking, and that means the return on your investments evens out over the long haul.
And if you’re like many retirement savers and invest in a target-date retirement fund, your account is automatically adjusting for market gyrations.
With a target-date retirement fund, you pick the year you’d like to retire and buy a mutual fund with that year in its name (like Target 2044). The fund manager then splits up your investment between stocks and bonds, typically both US and international, changing that balance to a more conservative blend as the target date approaches.
Read more: Retirement planning: A step-by-step guide
Are you retiring within three to five years? Listen up.
“If you’re in a position where you are a little closer to retirement and you’ve built that nest egg up, then it’ll be good to work with your adviser to see what strategies or products are out there that might protect you from downside loss,” Anderson said.
“Generally speaking, you might want to shift to a portfolio with less risk, by diversifying out of equities and more into fixed income holdings.”
That’s solid advice and in line with what I heard from many of the pros I talked to. When you’re close to stepping away from a steady paycheck, or already retired, you should have at least five years’ worth of living expenses in a combination of high-yielding savings accounts, CDs, money market funds, and high-quality bonds.
Today’s high rates have made cash, Treasurys, and bonds attractive again, Kirchenbauer said. “With 4% to 5% yields now available on low-risk investments such Treasurys, CDs, and money market accounts, investors have an opportunity to earn competitive returns while waiting for more clarity on inflation and rate cuts.”
Learn more about high-yield savings accounts, money market accounts, and CD accounts.
“This is the time to meet with your adviser to review your portfolio,” Kimberly R. Stewart, a certified financial planner with Ameriprise Financial in Orlando, told Yahoo Finance. “These are important factors in determining how your assets are invested and allocated. The goal is to ensure that your portfolio is properly allocated and diversified based on your investment objectives.”
Financial advisers generally suggest rebalancing (adjusting your mix of stocks and bonds) whenever your portfolio gets more than 7% to 10% away from your original asset allocation, which was built to match your time horizon, risk tolerance, and financial goals. To roughly determine what percentage of your portfolio should be in stocks, subtract your age from 110. So, a 60-year-old would have 50% in stocks and the rest in bonds and cash.
“The mistake a lot of individuals make,” Anderson said, “is that they aren’t reviewing their portfolios on a consistent enough basis, and that might make one vulnerable when distributing funds from these accounts in down markets — which is going to potentially erode that nest egg faster.”
Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.
“There will be more ups and downs, more back and forth, more uncertainty before we get clarity.” (Getty Creative) ·AscentXmedia via Getty Images
It’s time to put some of these good habits in place. As Kirchenbauer told me, this is just the beginning.
“There will be more ups and downs, more back and forth, more uncertainty before we get clarity,” she said. “As a skier, I think of it this way. This is not unlike when the light is ‘flat’ and you can’t really see in front of you, but a little farther out, you can see the contours of the slope. What skiers know is that they need to keep their knees bent and just ski through the flat light, staying focused farther down the hill.
“Right now, this may be all we can do — stay flexible and look ahead.”
My two cents along these same lines: When I ride down to a jump on my horse, I focus on the jump first, then lift my eyes and look beyond, keeping our pace steady, and always moving forward.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “In Control at 50+: How to Succeed in the New World of Work” and “Never Too Old to Get Rich.” Follow her on Bluesky.
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