Stock markets in the U.S. and around the globe have dropped since last week when President Donald Trump introduced tariffs on most imports. The sell-off is causing some Americans to rethink their financial investments, despite financial advisor recommendations to stay the course.
Money flowed in and out just 0.10% of 401(k) balances overall last week, according to data from Alight Solutions, which administers company 401(k) plans.
While small, the share is significant, Alight’s research director Rob Austin said in an email: “This is roughly four times average, because we typically see this level in a month.”
More than half, 53%, of the outflows in the week ending April 4 — $140 million — came from large-cap U.S. equities, he said. Nearly the same amount — 52%, or $138 million — went into stable value funds.
Alight data shows total 401(k) balances fell from $262 billion at the beginning of the week to $245 billion by the end of the day on Friday, a 7% decline on average.
About 70 million Americans participate in 401(k) plans, according to the Investment Company Institute.
The average 401(k) balance was $131,700 at the end of 2024 at Fidelity Investments, one of the nation’s largest retirement plan providers. A 7% decline in that account balance would amount to $9,219 in paper losses in just one week.
To weather a retirement savings squeeze, financial advisors say it’s best to stick to a strategy that reflects your ability to take risks both financially and emotionally. Here are three strategies that can help.
Settle on an investment strategy — and stick to it
Traders work on the floor of the New York Stock Exchange during morning trading on April 3, 2025.
Michael M. Santiago | Getty Images
An investment policy statement provides a framework for managing your portfolio, and helps you avoid making impulse decisions based on the news.
“I strongly believe in sticking to an investment policy statement that reflects my needs, and I tune out the rest of the noise,” said Carolyn McClanahan, a certified financial planner, physician and founder of Life Planning Partners in Jacksonville, Florida. “We are helping our clients do the same.”
Having a strategy can help you feel confident that when you do make changes, they suit your investment goals.
“It is perfectly fine to make some changes if needed. It also means having a discussion about the potential reduced upside [of doing so],” said CFP Lee Baker, the founder of Claris Financial Advisors in Atlanta.
Financial advisors say sticking your head in the sand can be a mistake.
“There are likely to be some tremendous buying opportunities in the wreckage,” Baker said, “but it requires both diligence and patience.”
McClanahan and Baker are both members of the CNBC Financial Advisor Council.
Consider your cash position
For many investors, building a cash cushion is top of mind. For example, when it comes to retirees or those planning to stop working soon, Baker said they might want to take “some risk off the table” and have enough cash “to sustain withdrawals for a year.”
Money market funds can be helpful in retirement and investment portfolios if you plan to retire in the next five years or are already retired, financial advisors and investment strategists say.
These so-called “cash equivalents” are highly liquid investments, and unlike money market accounts at banks and credit unions, these funds can be held in 401(k) plans and other qualified retirement plans. Top money market funds currently yield 4% or more, according to Bankrate.
Focus on the fundamentals
Even policy makers are uncertain what the economic impact will be from the tariff policy changes.
The Federal Reserve could move to drive interest rates lower if the economy slows, or adjust rates higher to address inflation concerns. But it’s not clear what will be needed.
“We’re going to need to wait and see how this plays out before we can start to make those adjustments,” Jerome Powell, Chairman of the Federal Reserve, said on Friday during remarks at the Society for the Advancement of Business Editing and Writing conference in Arlington, Virginia.
To help cope with the uncertainty, financial advisors recommend focusing on the fundamentals.
“If a trade war will reduce economic growth, what asset classes should you overweight in that environment? That’s different than changing your allocation because of a policy decision,” said CFP Ivory Johnson, founder of Delancey Wealth Management in Washington, D.C. Johnson is also a member of the CNBC FA Council. “Pay more attention to the data than the narrative.”
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