AMERICANS concerned over losses to retirement savings caused by turmoil in global markets after Donald Trump’s tariffs have no need to take any panicked actions, experts have warned.
As 401k holders questioned the impact of the tariffs on their accounts, advisors told The U.S. Sun that nine simple rules will ensure savings stay safe despite recession fears.
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The ongoing trade war and tariffs have resulted in high volatility in the stock market, sparking fear among investorsCredit: AP
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Jerry Parker, the CEO at Chesapeake Capital, is an expert in long-term investing. He gave nine rules to follow to keep your account safeCredit: YouTube/Excess Returns
Trump’s “Liberation Day” unveiling of tariffs on all goods into the US on April 2 sparked historic losses through financial markets worldwide as he raised the stakes of his trade war.
The announcement saw a blanket 10% tariff placed on all goods imported into the US, as well as additional tariffs on 60 countries, some reaching as high as 49%.
In the three days after the tariffs came into effect on Saturday, the S&P 500 - which tracks 500 of the biggest companies in the US - saw more than 10% of its value wiped out.
The stock market drops were among the worst one-day falls since the days at the beginning of the Covid pandemic in 2020.
Experts worldwide warned that if it continued, the chance of global recession would grow.
"Recession risks will likely rise materially if these tariffs are sustained," advised Deutsche Bank, according to CBS.
Trump has stood firm despite the market drops and threats of retaliation from countries such as China, and insisted the tariffs are a “medicine” that will see the United States reemerge as a greater economic power that puts its workers first.
The S&P 500 was up 3.7%, Dow Jones Industrial up 3.6%, and Nasdaq up 4.2% after morning trading.
Despite the respite, investors remain concerned over the hit to retirement savings after 401k holders saw chunks of savings vanish.
Trump team blasts '90-day pause' report causing stocks to plummet AGAIN after markets tank worldwide over brutal tariffs
When the stock market fluctuates, 401(k)s do as well because they are tied to the market through mutual funds, ETFs, or target-date funds.
When the market dips, such as during a recession, increases in inflation, or geopolitical instability, account balances can take a hit.
These shifts can be especially alarming for Americans nearing retirement, as they do not have as much time to recover their losses.
“Father of the 401k” Ted Bunna advised those in retirement years to start a shift toward less aggressive investing in their plans in an interview with The Philly Voice.
However for those with more time, Jerry Parker, an expert in long-term investing, risk management, and market psychology, told The U.S. Sun that the best advice is a four-word motto: “Tune out the noise.”
Parker, the CEO at Chesapeake Capital, shared 9 straightforward rules with The U.S. Sun on how to stay grounded as the stock market shifts as well as smart steps to protect your retirement savings.
1. TUNE OUT THE NOISE
The first piece of advice the financial expert offered was to "Tune out the noise."
Parker suggested that Americans avoid following the up-to-date news, as hearing talk of every dip and shift in the market can be overwhelming and disheartening.
It's more productive to focus on your long-term financial goals and stick to a steady investment strategy rather than reacting emotionally to short-term market fluctuations, he advised.
2. REMEMBER YOUR TIME HORIZON
Parker also advised Americans to continue with their long-term goals, calling short-term swings just "noise."
"A down year or two doesn’t matter in a 20- to 30-year plan," he said.
3. KNOW WHAT YOU OWN AND WHY
In order for Americans to feel more comfortable with the state of their retirement accounts, the financial pro suggested understanding the assets in your portfolio.
"Part of being successful by investing in stock index funds is sitting through the drawdowns and losses," he said.
"They are part of the process. That is how the long term money is made."
4. STICK TO YOUR PROCESS
Parker advised Americans saving up for retirement to keep their eyes on the prize.
"If you’ve built a diversified portfolio based on sound principles, don’t let short-term volatility derail your plan," he said.
"Discipline is what compounds. Get a plan if you don't already have one."
Echoing this advice, David Freisner, CPA, wealth advisor, and CEO at Konza Global Wealth Group, emphasized that trying to time the market bottom is "not a winning strategy."
"It can lead to individuals missing out on positive returns when the markets recover," he said.
"You should maintain a level of diversification within your 401(k), including equity-type funds."
Where to save your retirement money
There are several different places where you can put the money you save for retirement. Each has different tax advantages, but not all of them are available to everyone.
401(k) - an employer-sponsored retirement account. Contributions are made pre-tax and many employers will match a certain percentage of your contributions. Taxes are paid when the funds are withdrawn in retirement.
Roth IRA - an individual retirement account. Contributions are made post-tax but withdrawals in retirement are not taxed.
TSP (thrift savings plan) - a retirement savings and investment plan for Federal employees and members of the uniformed services. They work similarly to 401(k)s but may have more limited investment options.
Pension - an employee benefit that commits the employer to make payments to the employee in retirement. Pensions are becoming increasingly rare.
5. LIMIT CHECKING YOUR ACCOUNTS
Similar to refraining from constantly checking the news, Parker suggested that Americans set regular interviews to review their retirement accounts.
"Checking the market quotes, news, and balances creates anxiety," he said.
6. DIVERSIFY
Another piece of advice that the financial expert shared was that Americans stressed over their retirement accounts should spread their investments across asset classes such as:
US stocks
International
Bonds
Real assets
Gold and liquid alternatives like trend following and Managed Futures
Spreading investments across different asset classes helps reduce risk because if one area drops, others may hold steady or go up.
7. REBALANCE REGULARLY
Parker advised Americans to rebalance their portfolios regularly to helps keep their investments in check.
This helps to prevent having too much money in one area.
It also helps to avoid the mistake of panic-selling when prices are low or overpaying when they are high.
8. KNOW YOUR RISK TOLERANCE
Parker explained that it is important to know how much risk you are comfortable with.
If big market swings make you nervous or tempted to change your plan, that is a sign you may need to adjust.
The financial expert recommended raising some cash so you can stay calm and stick to your long-term strategy.
"If your highest concern is about protecting against further declines in your 401(k), then adjust your allocation towards short-term investments that include Treasuries and money market investments," added Freisner.
"If you have a moderate level of concern, then expand your allocation to also include corporate bonds, high yield bonds and emerging market income funds.
"These will provide you with more diversification in the fixed income space, while potentially realizing a higher return."
9. THE BOTTOM LINE
"Choose a process and plan and avoid emotional decisions," said Parker.
Although the stock market is highly volatile, the worst thing that you can do is react with emotion, he claimed.
The market is bound to change, but having a steady mind is key to staying on track with your financial goals.
"Stock markets tend to have resiliency and a history of bouncing back once clarity on economic policies are identified and more normalized data on US and global economies are back in force," said Freisner.
The current stock market conditions and economic landscape are having far-reaching impacts on the mentality of Americans.
