Is your 401(k) ready for market volatility?

Whether you are just beginning to plan for retirement or are mid-career and modifying your current strategy, choosing the right plan is an important part of preparing for retirement. When determining what investments to choose for your 401(k), thinking about the long term is one strategy to manage risk and increase your odds of enduring market volatility. The financial advisors at Harvest Wealth Partners can review your 401(k) with you to strategize an appropriate plan. 

What is a 401(k)?

If you are choosing a retirement plan for the first time, a 401(k) is a common option that many employers offer. A 401(k) is a retirement account that you regularly pay into out of your paycheck, which offers tax advantages, and which your employer may match contributions to. The contributions to your account are then invested with the intent of helping your money grow over time. Typically, an employer will provide a range of options to choose from. 

Long-Term Investments and Market Volatility

Market volatility refers to just how much prices change in the stock market in a given period of time. If stock prices change drastically or frequently, then they are considered more volatile. According to Forbes, investors can expect to see an average volatility of around 15% in a given year. In other words, in a typical year, the investments in your portfolio may vary by up to about 15% from the average value at any given time. In particularly volatile years for the market, this percentage may be much higher. 

When thinking about the value of your 401(k), this also means that it can be entirely normal for the value in your account to dip when markets are performing poorly. Unless you sell a position (and withdraw the money from the account), that does not necessarily mean that you have lost money. 

A common strategy for investment portfolios is to diversify the individual assets in that portfolio. By choosing a variety of options, you avoid “putting your eggs in one basket.” Because the stock market as a whole tends to grow over a long period of time, the hope is that the average value of your portfolio will also continue to grow. This means that as long as you do not sell at a low point in the market, there is opportunity for your portfolio as a whole to continue growing, even if individual assets perform poorly. When choosing a plan for your 401(k), a financial advisor can work with you to develop a strategy that may be suitable for current market conditions. 

Retirement Planning with Harvest Wealth Partners

At Harvest Wealth Partners, we recognize that there may be challenges involved in choosing a retirement plan that suits your circumstances. Market volatility can add an extra layer of consideration as you determine plans for your 401(k). Contact us today to learn how our professionals can work with you to create a customized retirement plan. 

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. 

Investing includes risks, including fluctuating prices and loss of principal.​ No strategy assures success or protects against loss. Past performance is no guarantee of future results. 

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This material was prepared for Harvest Wealth Partners.