Should You Rebalance Your 401(k) Right Now?

As Americans with 401(k) retirement plans lose thousands of dollars due to a downturn in major stock indexes, financial planners say 401(k) savers should focus on diversification in their portfolio.

Last week, President Donald Trump imposed “reciprocal” tariffs on imports from many foreign countries, ranging from 10% to as high as 50%. The stock market has been volatile as traders reckon with what tariffs will do to the economy. The major indexes, the S&P 500 and the Dow Jones Industrial Average, recently fell to their lowest level since the start of the COVID-19 lockdown in March 2020. And in turn, 401(k)s have been impacted by the stock market’s recent fall.

Some Americans on social media have said their retirement accounts have lost tens of thousands of dollars since tariffs were announced. It’s left many asking if they should rebalance their 401(k)s.

Market Volatility Serves As a Reminder Of How Important Diversification Is

The answer—as is often the case when it comes to retirement funds—depends on your situation.

The majority of savers who are further from retirement should be able to recover the money they lost once the market returns to normal. However, more than 4.1 million Americans who will turn 65, the conventional retirement age, this year may experience some interruptions when they try to enter retirement.

“You have time to recover from these downturns and generally, whether it’s quickly or it takes some time, the markets tend to move upward,” said Rob Williams, director of financial planning and wealth management at Charles Schwab. “If you’re a disciplined investor, or diversified in your portfolio, as most people would be, and you’re not retiring in the next two to four years, [you] should not panic.”

In the midst of stock market volatility, financial planners said 401(k) savers of any age should not completely change their investment plan or portfolio just because of market swings. However, they do advise reviewing 401(k) investments and potentially rebalancing portfolios to be more diverse.

“Some other international markets have actually performed better in this climate,” Williams said. “So this is a nice reminder and a highlight that in your stock portfolio, global diversification helps.”

Additionally, financial planners say this could be the time to build up your investments outside of the stock market. That could involve taking advantage of your employer match, buying real estate to build up equity, or placing money into high-yield savings accounts.