With the coronavirus causing global stock markets to tumble, many are concerned to see their retirement funds decline in value as well. But financial experts urge people not to panic, as 401(k) investment is for the long haul.

“People focus too much on the current value. If you look at your investment performance from the beginning of time, you are probably way ahead of the game,” said Jason Dwyer, CPFA, QKA, president and founder of Jackson Avenue LLC, an investment advisory company.

Because 401(k) plans are designed to be used when people retire, how close a person is to that stage matters. For those who won’t retire for several decades, the volatility shouldn’t concern them.

“Over time, stocks have always recovered and been the best place for investors to earn returns over any five-year, 10-year, or 20-year period,” said Joseph Syron, PPC, AIF, a senior consultant at DiMeo Schneider & Associates, L.L.C., an investment advisory firm.

He cautions that selling now would be a mistake. “If you decide to get out of the market, you have two decisions to make,” Syron said. “The harder decision is when do you go back in? Do you enter the market when it goes up 20 percent?”

Trying to time the market doesn’t typically work. “They really hurt their retirement prospects by leaving at the wrong time,” Syron said.

Staying invested is the best option, and as people get closer to retirement, they should mitigate the volatility of the stock market by including less-volatile assets, like bonds, in their portfolios. And as a person closes in on retirement, they should protect the assets they plan to use first.

“You want to figure out how much of your account balance you are going to take out in that first one to three years, and bubble wrap that,” Dwyer said.

However, people shouldn’t dump all risk when they get close to retirement. “They are not going to use all of that money in the first year they retire,” Dwyer said. “They are planning on spreading this out for 10, 15, or 30 years. They need to keep investing.”

Dwyer and Syron noted that most 401(k) plans include “target date” portfolio options that provide a professionally selected mix of assets based on a person’s expected retirement date.

“More than half of all contributions that come into retirement funds go to target date funds, so it’s the most popular, and with good reason,” Syron said. “People don’t have the time or the interest to study the stock market. They want it professionally managed so they can work on saving that extra dollar.”

Dwyer recommends people stay the course and continue to invest in their 401(k), even increasing contributions if they’re able to because stocks are “cheap.” People also might want to consider rebalancing. Dwyer offered the example of a person who wants 50 percent of their assets in stocks and 50 percent in bonds. “With stocks coming down [in price] a bit, now you may have 70 percent in bonds and 30 percent in stocks,” Dwyer said. “Rebalancing is going to sell 20 percent of bonds, which are relatively high, and buy 20 percent of stocks, which are low. What rebalancing does is sell high, buy low.”

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