Many Americans are concerned about their financial ability to retire, and economic instability is causing these fears to grow. According to a recent Bank of America report, most employees (63%) believe that current economic uncertainty will affect their current and future workplace benefits and 401(k) retirement plans.
Don’t Let Your Worries Stop You From Saving
The economy ebbs and flows over time, so you should not stop saving in a 401(k) just because the economy is in a downswing, said Kai Walker, head of retirement research and inclusion transformation at Bank of America.
“Saving for retirement is a long-term journey,” he said. “Employees should consider growing their 401(k) as a marathon and never a sprint. Even during uncertain times when the ebbs and flows of the economy can feel stressful, it’s vital to keep saving for the future.”
Types of Retirement Plans: How To Choose the Right One for You
How To Keep Your 401(k) Savings Secure
There are a number of ways to protect your 401(k) from economic uncertainty. One of the best things you can do is to diversify your portfolio.
“Diversification is crucial,” said Andrew Latham, certified financial planner and director of content at SuperMoney. “It’s the age-old wisdom of not placing all your eggs in one basket. By spreading investments across a mix of asset classes, such as stocks, bonds and real estate, you can create a safety net against significant losses in any one area.”
You should also view downswings as an opportunity, rather than a reason to panic.
“Another key principle is to retain a long-term perspective,” Latham said. “While the stock market undeniably experiences fluctuations, history has shown an overarching upward trend. Even if the immediate outlook seems bleak, there’s potential for recovery and growth over more extended periods.
“In fact, one might even view downturns as opportunities,” he continued. “Sometimes, it’s useful to think of stock market declines as seasonal sales in a store. Assets are now available at a discounted rate, offering a chance to acquire more for less. By adopting this mindset and viewing downturns as a buying opportunity rather than a crisis, you position yourself for potentially higher returns when the market eventually rebounds.”
If you find yourself getting very anxious during downswings, consider taking a more conservative approach to your 401(k) investments, said Jessica C. McDonald, CFP, founding advisor at Southern Wealth Builders.
Finally, make sure that you regularly rebalance your portfolio.
“Regular portfolio rebalancing can help maintain your desired risk level,” Latham said. “As market dynamics shift, your actual asset allocation might deviate from your intended one. Periodically readjusting can help you stay on track.”
Consider Working With a Professional
If you’re stressed out about your 401(k), consider meeting with a professional who can help mitigate any concerns.
“Working with a financial advisor can provide valuable guidance and peace of mind during turbulent economic times,” Bank of America’s Walker said. “An advisor can help manage your risk, make strategic adjustments to your investment portfolio and develop a long-term retirement savings strategy tailored to your individual goals.”
More From GOBankingRates