Disclaimer: This article is for educational purposes only and does not constitute financial advice. 401(k) decisions should be made in consultation with a qualified financial advisor based on your individual retirement timeline, risk tolerance, and overall financial situation.
You logged into your 401(k) and it’s down. Maybe it’s down significantly. Your first question is probably: should I move everything to something safer? The answer depends heavily on one number that most people don’t think about first: how many years until you retire.
The Time Horizon Determines Almost Everything
A 401(k) loss is not the same as losing cash in your wallet. It’s a paper loss in a long-term account whose purpose is decades away. The S&P 500 has never produced a negative return over any rolling 20-year period in its history. Over any rolling 10-year period, negative returns have been rare (and occurred only in the worst multi-decade stretches like the Great Depression era). Over 1–3 year periods, negative returns are common and expected.
Related: evidence-based supplement guide
If retirement is 20+ years away: a down market is not a crisis. It’s a sale. Your ongoing contributions are buying shares at lower prices. If retirement is 3–5 years away: this is a legitimate risk management question that deserves attention and possibly consultation with a financial advisor. If retirement is next year: your allocation should not have been heavily in volatile equities — this is a planning conversation, not a panic response.
The Worst Thing You Can Do
Move your 401(k) into cash or “stable value” funds after a market decline. This locks in the loss, removes you from participation in the recovery, and leaves you facing the impossible problem of deciding when to get back in. The research on this is consistent across multiple studies: investors who sold equity positions during the 2008 crash and moved to cash recovered dramatically less than those who stayed in equity funds, even though staying felt terrifying at the time.
Fidelity Investments analyzed their 401(k) data after 2008. The accounts that had the best outcomes by 2012 were from investors who didn’t look at or change their accounts during the crash. Inaction was the optimal strategy for long-term investors.
When to Actually Take Action
Your Allocation Is Riskier Than Your Timeline Warrants
If you’re 58 and 90% in aggressive growth funds, a 40% market decline is a genuine problem — not because the decline happened but because your allocation was inappropriate before it happened. The standard rule of thumb: subtract your age from 110 to get your approximate equity percentage (110 – 58 = 52% equities). Target-date funds automatically adjust this — if you’re in one, it’s already managing this for you.
You’re Not Contributing Enough
If a market decline has prompted you to revisit your 401(k), use the moment to confirm you’re at minimum contributing up to any employer match. An employer match is a 50–100% instant return on your contribution — there is no other risk-free return available at that level. Not capturing the full match because of market anxiety is one of the most expensive mistakes in retirement planning.
Your Funds Have High Expense Ratios
While reviewing, check your fund expense ratios (the annual fee taken from your investment). The difference between a 0.05% expense ratio (typical for index funds) and a 1.0% expense ratio (common in actively managed funds offered in some 401(k) plans) compounds to tens of thousands of dollars over decades. A down market is a good time to optimize fees — not by selling, but by shifting contributions toward the lowest-cost fund options available in your plan.
See also: index fund guide
A Framework for Decision-Making
- Retirement 20+ years away: do nothing. Continue contributions. Consider rebalancing annually.
- Retirement 5–15 years away: review allocation. Consider a slightly more conservative mix. Don’t sell — adjust new contributions.
- Retirement under 5 years: consult a fee-only financial advisor. This is the window where specific advice matters most.
Sources: Vanguard Research (2022). Dollar-cost averaging and long-term investing outcomes. | Fidelity Investments (2014). Lessons learned from the 2008 crisis. | Bernstein, W. J. (2002). The Four Pillars of Investing. McGraw-Hill.
Disclaimer: This article is for educational and informational purposes only. It is not a substitute for professional medical advice, diagnosis, or treatment. Always consult a qualified healthcare provider with any questions about a medical condition.
Your Next Steps
- Today: Pick one idea from this article and try it before bed tonight.
- This week: Track your results for 5 days — even a simple notes app works.
- Next 30 days: Review what worked, drop what didn’t, and build your personal system.
Last updated: 2026-03-16
About the Author
Written by the Rational Growth editorial team. Our health and psychology content is informed by peer-reviewed research, clinical guidelines, and real-world experience. We follow strict editorial standards and cite primary sources throughout.