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Your Financial Future

Five tips for managing a 401(k) during the pandemic’s turbulence

Experts say focusing on the long game, as much as possible, is key.

Adobe Stock images/photo illustration by Greg Klee/Globe staff

Worried the pandemic will cripple your retirement plans? You’re not alone.

Roughly half of working Americans save for their later years, stockpiling much of it in 401(k) plans, IRAs, or pension plans. A survey conducted by Bankrate.com in June found Americans’ second-biggest personal financial regret since the pandemic began is a lack of retirement savings (a lack of emergency savings ranked as number one).

As the pandemic began spreading across the United States in March, the Dow Jones industrial average, S&P 500 index, and other stock benchmarks plummeted. Unemployment rose to historic levels and the economy took a turn for the worse. Then Congress passed legislation and the Federal Reserve took several steps to bolster the economy, delivering a potential $3.7 trillion in aid through spending, tax cuts and tax deferrals, loans, and other measures, according to a tally kept by the nonpartisan Committee for a Responsible Federal Budget. Since then, stock markets have unexpectedly bounced back toward pre-pandemic levels.

“If anything, the strong rebounds seen in the major averages have caught many investors by surprise,” says Mark Hamrick, a senior economic analyst at Bankrate.com. Those who sold off their shares learned “why focusing on the long term is so important,” he adds.


Here are some tips from experts on how to manage your retirement funds when the future of the economy is anything but certain.

1. Don’t act based on emotion — or try to predict the future.

“Focus on what you can control,” advises Nicole Peterkin Morong, a certified financial planner and founder of Peterkin Financial in Braintree. She says her clients are more financially secure overall since the pandemic began because they had already set their fiscal priorities.

“Trying to time the market is, at best, impossible and, at worst, counterproductive,” Hamrick says. “Very few people are capable of knowing when to get back in.”


2. Check your pie chart.

It’s worth examining your investment distribution among bonds, stocks, cash, and other assets, such as real estate. Look at percentages, not dollar amounts, advises Jennifer Lane, a certified financial planner and owner of Boston-based Compass Planning Associates.

Some employers slashed 401(k) contributions completely as markets sank this spring, further paring back employee gains, Lane says. If you’re worried, “Look at your pie chart percentages,” she says. If, for instance, stocks make up roughly the same percentage or a few percentage points less than you intend, you likely won’t have to make any changes.

3. Consider “target-date” funds or set your own goals.

Big money managers like Fidelity Investments steer nervous investors toward “target date” funds. These funds gradually — and automatically — shift money to typically lower-return but less risky investments, like US treasuries, as your retirement date approaches.

Targets and target funds are a good idea, says Alicia H. Munnell, director of the Center for Retirement Research at Boston College. “If you have a target date fund, the fund takes care of this rebalancing,” she says. “If you don’t have a target date fund, the danger is that you just don’t pay attention, and you could be in a very imbalanced position” over time.

4. Practice patience; an economic recovery could take years.

While, in general, economies have rebounded in years, not decades, that pattern isn’t a guarantee this time around. Give yourself time and space to think. “Then you can understand how much risk your plan can absorb, how much risk you can stand,” says Rick Miller, a certified financial planner and founder of Waltham-based Sensible Financial Planning. View stock market gains as extra, not essential, Miller advises. If your plan relies on stock returns for day-to-day expenses, then “you’re making a big, big bet that you could lose,” he says.


5. Make goals based on your age.

The right way to handle your retirement account depends on when you’ll need to tap into it. Experts offer the following age-specific advice:

  • 20s: Twentysomethings won’t need to worry about short-term market swings for decades. “And so they should just leave it there and forget about it and go about their business,” Munnell says.
  • 30s and 40s: Consider upcoming needs like college tuition for your children. Munnell recommends opening a 529 college savings fund that shifts to less-risky investments as children get older.
  • 50s and 60s: Regularly review your retirement savings to look at risk. Portfolios should move to 50 or 60 percent less-risky investments as the traditional retirement age of 65 approaches.
  • 65 and older: As age 70 nears, stock funds should move to roughly 30 percent of your portfolio, declining further as you reach 80 and above.


Rachel Layne is a freelance journalist based in Boston. Send comments to magazine@globe.com.