5 Reasons To Leave Your 401(k) Alone When the Stock Market Drops

Based on Vanguard’s 2024 analysis, the average 401(k) balance for Vanguard participants in 2023 was $134,128, an increase of 19% from 2022. It’s worth pointing out that this is just an average figure, since the amount you have will depend on your age, when you started investing and how you’re investing.

The good news is that a retirement savings account can help you cover expenses in your golden years when you eventually leave your job. However, to retire comfortably one day, you’ll have to be disciplined with your 401(k) and how you balance your portfolio in the face of economic hardships during your career. You could hurt your future finances if you tweak your portfolio too often.

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Here are five reasons you shouldn’t make changes to your 401(k) when the stock market drops.

Also see how long it takes to become a millionaire through your 401(k).

The most important takeaway from the retirement experts is that you have to remind yourself that your retirement account is a long-term investment vehicle for your savings, especially if you’re early into your career. For example, if you’re only in your 30s, you still have at least another 30 years or so to grow your funds to have enough money to cover your expenses in your golden years.

As such, it’s important to not make hasty decisions with your 401(k) when the stock market drops.

“Your 401(k) is designed to be a long-term investment vehicle for retirement,” said Jay Zigmont, Ph.D., CFP, founder of Childfree Wealth. “Contributing each paycheck to your 401(k) is a form of dollar-cost averaging.”

The standard investing advice is that consistently selling high and buying low is nearly impossible, and even the best investors out there aren’t able to time the market. You want to instead focus on making consistent contributions to your retirement fund.

“Time is your best friend here, the longer you’re contributing to it, the more you’ll be rewarded down the road,” said Adam Puff, a financial advisor and founder of Haddonfield Financial Planning. “Aside from that, even the very best investors can’t time the stock market.”

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“Unless you have copious amounts of time to research and constantly track the market, you don’t want to mishandle your 401(k),” Puff said. “What’s important is to continue putting money into it.”