9 Things to Do Right Now If Your 401(k) Is Tanking

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• If you have decades before retirement, experts say you should ignore the balance in your 401(k).
• You have years to make up for current losses, and the market always goes up.
• Keep contributing on a regular schedule, and avoid impulsive moves.

Many investors felt on top of the world when it came to their finances at the end of 2021. After all, the S&P 500 returned over 26.61% for the year and the Dow Jones Industrial Average returned a respectable 18.65% last year to boot.

But, we all know what has happened since the beginning of 2022. Inflation is surging, reaching a 41-year high of 8.5% as of March 2022. Financial markets are also down, with the S&P 500 more than 18% lower than it was on January 1, 2022 (as of this writing).

If you have taken a peek at your 401(k) or other retirement accounts recently, you are probably well aware of what is happening — and the pain that comes with it.  But what can you even do about it? 

We interviewed several financial experts to find out their thoughts on what individuals and couples should do with their retirement savings in 2022. If you’ve been losing money in your 401(k) and wondering how to handle it, read on to hear their advice.

Keep things in perspective

While watching your retirement portfolio drop like a rock is never fun, financial planner Taylor Schulte of the Stay Wealthy Retirement Show says you have to look at this issue from more than one point of view.

Schulte says that, while the S&P 500 is off to the worst start since 1939, it is still up approximately 25% since January 1, 2020. 

“Investing is hard. It’s also risky,” he says. “And that’s precisely why the long-term rewards are so great.”

Try not to look

Chicago financial planner Roger Wohlner says the vast majority of people should ignore the markets and move forward with their 401(k) investing strategy. After all, this year’s dips in your portfolio may be nothing more than a blip on the radar several years from now.

“Movements in the stock market, even steep declines as we’ve seen in recent days, are short-term,” he says. “Investing in your 401(k) for retirement is a long-term proposition.”

Remember why you’re investing

According to Los Angeles financial advisor Greg Vojtanek of Fade In Financial, it’s important to remember why you’re in a 401(k) to begin with. For every single person who uses this type of account or any other retirement account, you’re investing for the future.

“While this market may sting right now, you’re not investing in a 401(k) for right now,” he says. “You’re investing in a 401(k) because it will create better returns over time.”

Volatility is normal

Financial advisor Matthew Jackson of Solid Wealth Advisors says it can help to look back longer term to see how markets have reacted. When you do, you’ll find that the markets have always rebounded once enough time has gone by. 

“Since its inception, the NYSE has endured world war, regional wars, presidential assassition, Black Monday, the dot-com crash of 2002, 2007, 2008, and COVID-19,” he says. “Yet, the NYSE continues to grow higher.”

Stocks are ‘on sale’

If you have several decades to retirement and you’re worried about losses in your portfolio, try to think of it as an opportunity, says financial advisor Travis Gatzemeier of Kinetix Financial Planning.

“The more shares you can accumulate while building wealth, the more you’ll benefit in the long run,” he says. 

Gatzemeier adds that your ongoing contributions are buying more shares with fewer dollars, and that you should focus on the number of shares rather than the value.

“Retirement account investments are earmarked for the long term, so keep in mind that you likely won’t need this money for short-term obligations. This can help separate your behavior from your money.”

Turn off the news

If you are constantly watching the financial news or listening to pundits talk about the stock market, financial planner Marianne Nolte of Imagine Financial Services says to cut it out.

Not only should you avoid checking your accounts daily, but you have to stop listening to the media hype. 

“It is easy to get excited by market highs and depressed by market lows,” says Nolte. “A steady approach over time is the better investment strategy.”

If anything, rebalance

While most retirement savers should do absolutely nothing in light of recent market downturns, some investors may want to take the time to rebalance their portfolios right now. Financial coach and former financial planner Michael Ryan says this can make sense if your portfolio is no longer aligned with your investment goals. 

How does rebalancing work? Ryan says rebalancing involves “selling some assets that have increased in value and buying others that have lost value, in order to restore your desired asset allocation.”

If you’re unsure whether you should rebalance or how to go about it, you can always reach out to a financial planner for help.

Avoid drastic, impulsive moves

Financial advisor David A. Fowler of High Mountain Financial says that, no matter what you do, you should avoid making any big moves with your retirement funds. He adds that far too many people move their retirement investments to cash during market downturns, and that this move does nothing other than making those losses permanent.

When people get scared during a decline and go to cash, they have usually lost 20%, 30%, 40% or more of their portfolio, he says. At that point, however, they are too scared to get back in after the market has recovered. From there, it’s common to stall so long they miss some or all of the gains that occur as the markets climb back up.

Continue dollar-cost averaging

Finally, Robert R. Johnson, professor of finance at Heider College of Business, Creighton University, offers this piece of advice: Don’t change anything because of market conditions. Instead, he says to continue dollar-cost averaging into a diversified market index mutual fund or an ETF.

“Dollar-cost averaging is a simple technique that entails investing a fixed amount of money in the same fund or stock at regular intervals over a long period of time,” he says. “You should continue that practice whether the market is going up, down, or sideways.”