Worried how the stock market could impact your retirement? Here are 3 questions from experts.

CBS News

17-03-2025

Watching your 401(k) plan savings recede as stocks slide can be gut-wrenching, sparking anxiety about whether you'll ever be able to retire — a particularly loaded issue for Gen Xers, given the oldest members of the generation are hitting 60 this year.
But financial experts say it's important not to panic in the face of
plunging markets
or rising
recession risks
because that can lead to rash decisions that cost you money. Instead, it's important to focus on some key investment questions before taking action, they say.
Since his Jan. 20 inauguration, President Trump's tariff barrage has spooked investors and
soured
consumers on the economy, with many fearing that his trade policies will trigger inflation and slam economic growth. The S&P 500 last week briefly moved into so-called
"correction" territory
, meaning the index had tumbled 10% from its most recent high, although it regained some ground on Friday.
The downdraft in stocks is causing angst among people saving for retirement, experts say.
"First of all, you aren't alone — a lot of people are panicking," TIAA wealth management director Doug Ornstein told CBS MoneyWatch. "Don't overreact, but it might be appropriate to take some action."
The market turmoil comes as many employees already feel behind the curve, with 7 in 10 workers saying they believe they could work until they retire and still not have enough money to fund their golden years, according to a new Transamerica Center for Retirement Studies
report
.
"Everyone is navigating difficult waters right now and trying to understand what the effects of market volatility will be on their overall retirement savings," noted Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies. "One thing they should be doing, but many aren't, is engaging in the basics."
Here are some key questions that experts recommend you consider making changes to your retirement account.
It's easy to think you've got a high tolerance for risk when stocks are in a bull market, as they've been for the last few years. But the current market turmoil may be a sign that that you're more cautious than you thought, experts say.
Risk tolerance is sometimes assessed in a quiz (such as
this one
from Vanguard) that asks hypothetical questions about your approach towards investing, such as whether you might sell a bond if it lost money in a short period of time.
"How do I think about risk, and how do I feel about risk emotionally and psychologically — all of that is completely valid to consider," TIAA's Ornstein said.
But it's also important to consider your risk capacity, which involves a more complicated calculation including data such as your age and your retirement horizon. That offers a more objective way to assess risk than your emotional reaction to losing money on investment.
"Both things are really important: How you feel about risk, and what resources do you have" to manage that risk, he noted.
Workers often think about their investment horizon as the number of years they have left in the workforce, which might seem daunting to a Gen Xer who is getting closer to retirement.
But the truth, which might not be intuitive to some workers, is that this timeframe is likely much longer than you expect, Ornstein said.
"Let's say someone is 60 and plans to retire at 67 — they don't have a lot of time for the market to recover" before they retire, he noted. "But if you retire at 67 and live to 95, most of your money will probably remain invested for next 20, 25, 30 years."
He added, "We'll see a lot of ups and downs, bull and bear markets, presidential administrations, and economic cycles over the next 20 to 30 years, so what is happening right now shouldn't dictate a massive change."
In other words, someone whose retirement is just a few years away might have an actual investment time horizon of 30 years, which means sticking to their financial plan.
More generally, trying to time the market, or trading individual stocks in an effort to capture gains and avoid losses, is almost impossible and typically leads to financial losses and lost opportunities, considerable research
has found
.
Although it's important not to overreact when markets are rocky, rebalancing your investments can be a good idea is such periods, Ornstein said.
"Buy and hold works well when the market is just going up and up," he said. When markets head south, "It may be a good time to consider rebalancing into a more diversified mix of investments."
For instance, that means not only checking your mix of equities and fixed income, but also your mix of sub-asset classes within those categories. Adding international stocks, for instance, on top of your S&P 500 index fund could help spread the risk, as well as considering different types of fixed income investments aside from Treasuries.
And don't forget to tend to your emergency savings, given that having a cash buffer can help in times of financial stress and keep you from raiding your retirement account, noted Transamerica's Collinson. Her group's research found that 37% of workers have tapped their retirement accounts, suggesting that many people use their 401(k)s as an emergency fund.
Workers can ask their employers to set aside a portion of their paycheck in another bank account that they earmark for emergency savings. Some employers also are starting to enroll workers in accounts specifically
designed for emergencies
, a change that was enabled by the Secure 2.0 retirement law.
"The research indicates many workers lack adequate emergency savings," she said. "Now is the time to find out how to build that up."