Retiring In More Than 10 Years? What To Do In The Face of Tariff-Related Stock Market Volatility

In the wake of volatile stock movements in response to President Donald Trump’s tariffs, many with a 401(k) retirement plan saw their savings fall. However, the majority of workers who are more than 10 years away from retiring will eventually see their savings grow back, advisors said.

Trump’s “reciprocal” tariffs went into effect Wednesday and vary by country. As investors attempted to understand how the tariffs will impact consumers and the economy, major stock indexes fell sharply.

As 401(k) investors saw their savings fall, many have made changes to their portfolios. However, financial advisors said the market will likely rebound once the effect of Trump’s tariffs becomes clear. Once that happens, 401(k) investors who are more than 10 years away from retiring will generally find their savings have returned to normal, said Sarah Paulson, a certified financial planner and CEO of Valkyrie Financial.

Investopedia asked Paulson how 401(k) investors can protect their retirement plan from recent market volatility. The interview has been edited for brevity and clarity.

INVESTOPEDIA: Is the market volatility resulting from Trump’s reciprocal tariffs something that 401(k) investors should be concerned about?

SARAH PAULSON: If you’re not going to be turning age 59 and a half in the next 10 years—which 59 and a half is when you can access your 401(k) money without having to pay penalties on it—you really shouldn’t be concerned about this. 

Past performance does not guarantee future results, but in the past, there’s never been a 20-year period where the S&P 500 was negative. There’s barely been a 10-year period where the S&P 500 was negative. So, looking historically, yes, this is all going to come back up at some point. 

INVESTOPEDIA: Will 401(k) investors who have seen their retirement plan amounts fall get that money back in the future?

PAULSON: I think it’ll go back to normal. The beauty of 401(k) and other workplace retirement plans is that you’re typically putting money in with every paycheck. So instead of looking at what you’ve lost, now think of the money going in that’s going to be buying things kind of ‘on sale,’ so you’re going to get more bang for your buck without having to do anything. You can kind of think of this as the Black Friday of stock markets.

Looking at it from a long-term perspective, going forward these moments in market history are so good. This is where the money is really made. Typically, we see some of the best days come very shortly after the worst days, which is why just letting it ride is the best course of action.

Think of it like cutting bangs. You never cut bangs when you’re upset. If you are looking at your 401(k) and you’re upset, that isn’t the time you should be playing with it.

INVESTOPEDIA: How can someone position themselves to be protected from general market volatility?

PAULSON: I’m a pretty big set-it-and-forget-it kind of gal when it comes to investing because I don’t know the future. Wish I did, but I don’t. So, I don’t think I’m smart enough to get in front of whatever the next big thing is going to be. Instead of that, I put money into all different baskets. 

Right now, the U.S. is taking the brunt of the stock market declines, but international stocks are actually doing okay. So we’re picking up a little bit from that side of things, where we’re losing from the U.S. Or, instead of owning companies, owning fixed income and bonds, which is going to give you regular income. It’s more of a safe investment when things get rough in the stock market; a lot of money goes into bonds because it is more secure. We actually called a flight to safety. It happens so often that we have a name for it.

Don’t overthink it too much, and just use the tools that you have at your disposal. A target date fund is really great for that. If your company 401(k) offers you the chance to talk to someone like an advisor, that’s part of the plan, take them up on it, and ask those questions about ‘What does this all mean?’. So that you can be a little bit more confident that you’re in the right places and not just trying to chase the high that’s happened in the past.