A 1, 2, 3 on 401(k) Day: 3 Important Reminders Amidst Market Uncertainty

This year has been a tough one for retirement savings. Inflation is high, markets are volatile and it’s hard to know where we’ll be in a few weeks, months or even a year. This environment has made it difficult for many Americans to feel financially secure and some savers may have dipped into their retirement savings or used funds for other emergencies.

Even with all the uncertainty, it’s important to understand that a retirement plan can be your most valuable tool when it comes to saving for the long-term and feeling secure. Our 2022 Read on Retirement survey found that 63% of workplace savers – those with access to a workplace plan – feel on track for retirement, compared to about 51% of those without access.

So on this 401(k) Day, remember to keep sight of the bigger picture, resist the urge to stop contributing and understand that short-term volatility can be navigated for long-term success.

Take a long-term diversified approach

Retirement savings are invested for decades, which provides a major advantage over short-term volatility. With this in mind, it is crucial to stay on course when markets are volatile because blips in the markets may have little effect on your savings in the long run.

Additionally, if you are invested in a target date fund (TDF) – which is often the default in retirement plans – your fund is designed for the long-term, including periods of market volatility. TDFs take out the guesswork and adjust asset allocation based on your retirement age. For those nearing or in retirement, exposure to stocks will reduce overtime as investment in less risky assets, like bonds, will simultaneously increase. Younger investors with a longer investment timeline will have more exposure to stocks, allowing them to benefit through market improvements.