Safeguarding Your 401(k) During Market Turbulence

The stock market has been turbulent in 2025, with volatility largely driven by trade tensions and tariff policies. As other countries retaliate, market unpredictability is rattling investors. For those with retirement portfolios, this can be an unnerving experience. So, how should you approach your 401(k) in the face of market fluctuations?

Below are some key insights and strategies to navigate the current uncertainty and help protect your long-term retirement goals.

It’s tempting to react to market volatility with quick, short-term moves—like selling off investments to avoid losses. But experts agree: panic selling is rarely a good strategy for your retirement portfolio. Reacting to short-term market fluctuations can often lead to costly mistakes. Remember, your 401(k) is a long-term investment. An immediate reaction to short-term turbulence could hinder your ability to reach your retirement goals.

In volatile times, maintaining some exposure to cash and high-quality bonds can provide stability, but experts warn against going too far in the other direction and being overly cautious. While it’s important to buffer against volatility, you don’t want to sacrifice long-term growth for the sake of avoiding short-term risk.

A good approach for those approaching retirement is to allocate 25-30% of their portfolio to short-term and intermediate-term bonds. This helps maintain some growth potential while providing a cushion against volatility. But even for those nearing retirement, it’s important not to give up on growth entirely. After all, you may need your retirement savings to last decades.

While no strategy can eliminate risk entirely, spreading investments across different asset classes (stocks, bonds, real estate, etc.) and sectors is essential. Diversification may help soften the impact when certain sectors experience downturns, such as when tariffs hit manufacturing, technology, or consumer goods.

It is important to note that some of the stock market’s best days occur during or just after bear markets. Oppenheimer Asset Management Research shows that missing the 10 best market days over the past 40 years would have reduced wealth by as much as 54%. Reports also state that 78% of the market’s best days have happened during a bear market or the first two months of a bull market.

OAM Research also notes that “While painful, multi-month corrections are common with the average intra-year drop for equity markets over the past 35 years standing at 13.95% in 27 of the last 35 years, the S&P 500 saw a pullback of 7% or higher – yet only 10 of those years have had a negative annual return." This illustrates a critical point: avoiding the downs can also mean missing out on the ups.

Tariff policies can significantly impact your 401(k) and employer-sponsored retirement plans. These tariffs increase manufacturing costs and can disrupt industries like technology and consumer goods, leading to lower stock prices and increased market volatility. Since most 401(k) accounts are linked to the market’s performance, your portfolio’s value can fluctuate with these changes.

Withdrawing funds from your 401(k) before the age of 59 ½ generally triggers early withdrawal penalties, and it could prevent your money from growing when the market rebounds. Staying invested gives your funds the chance to recover during future market rallies.

For those approaching retirement, avoiding overexposure to sectors or international stocks vulnerable to trade disruptions is key to managing stress and helping to preserve portfolio health. On the other hand, younger investors should stay the course and continue to hold equities, even during challenging times.

For those in their 50s and 60s, extending your career for even a few years can provide more time for your investments to grow and help boost your retirement savings. Additionally, delaying claiming Social Security could lead to higher monthly benefits, providing more security in retirement.

It is also important to ensure that your essential expenses in retirement are covered by guaranteed income sources including pensions, Social Security, and annuities. Holding sufficient cash and bonds in retirement may also help you to avoid selling stocks during a more turbulent market period. Treasury Inflation Protected Securities (TIPS) are another way to reduce risk against inflation, however they are usually more expensive than conventional bonds, and may lose value if inflation does not meet expectations.

If the market’s recent volatility is causing concern, it’s a good idea to take a step back and evaluate your portfolio. Are you overly concentrated in sectors most affected by tariffs, like manufacturing or technology? Or are you well-diversified across a mix of assets? Rebalancing your portfolio to cushion against market downturns might help you feel more secure, but remember to focus on long-term goals. Read more about market volatility from OAM Research here.

In today’s volatile market, your 401(k) could experience significant fluctuations. While it’s natural to feel nervous, reacting impulsively can harm your long-term retirement prospects. Maintain a balanced portfolio, stay diversified, and don’t let short-term turbulence derail your plans. With patience and a steady approach, you can weather the current storm and position your retirement savings for growth in the years to come. Reach out to an Oppenheimer Financial Professional to discuss how you can better navigate the current market. Find one in your area here.