Handling 401(k) Concerns as Stock Market Dives

By Anthony Birritteri, Editor-in-Chief On Apr 7, 2025

With the stock market continuing its nosedive due to the global trade tariff war begun by President Donald Trump on “Liberation Day” last week, investors young and old are seeking advice on what to do with their 401(k)s and other retirement savings vehicles.

Should they ride out the decline in markets and continue buying stocks while prices are low, or should they switch to more conservative investments to save what they have, no matter how much they have lost these past few days?

The answers are many and are based on one’s age, tolerance for risk, and as seen currently, the political situation.

As for the latter, James O’Donoghue, investment advisor representative for BCG Securities in Cherry Hill, says the trade tariffs the president put in place are a self-inflicted wound and that the stock market will continue to be “volatile.”

This is different than when the market crashed during the first weeks of the COVID pandemic. O’Donoghue said the market then corrected itself and reached an all-time high within 90 days. Today, he thinks investors are in for a rough year.

His advice to clients – many of whom were consistently calling him during this morning’s interview with New Jersey Business Magazine – depends on their age. “For my clients who are six to seven years from retirement, my primary role is to hold their hands and convince them to stay the course. Those who end up in the most trouble, in the long run, are those who move to cash after the market crashes and miss the ride back up as the market rallies back,” he says.

For clients closer to retirement, O’Donoghue has been helping them make tweaks to their 401(k)s. BCG, which is the provider of NJBIA’s Retirement Savings Program, offers 401(k)s with target date funds, based on one’s age and expected retirement. The good news is that the 2030 target, as of today, is down by just 3.4% while the NASDAQ, for example, was down 24% and the S&P was down by 15% at one point. That is great, O’Donoghue said, but he is helping some clients dial back the investment risk and be more conservative.

For individual clients who are already retired, O’Donoghue explained that if there is another 15% to 28% drop in the market, which will be 40% off from their highs, he says he would recommend moving some money out of bonds to buy equities. “I don’t think we are at that point yet, but if it gets worse, it’s worth taking a bite of 5% or 10% from your account and buy an S&P index fund and ride the market back up,” he said.

For people under 40, O’Donoghue said his No. 1 recommendation is to ignore the market. “Just put your money in. Don’t look at it.”

He said market corrections are bound to happen every few years, but again, the correction this time around may take longer. “It’s not going to be a quick turnaround. The damage has been done. Countries are not going to trust us and people will stop buying American products. The tariffs are having the opposite effect of their original intent.

“We’re going to go through a tough year,” O’Donohue concludes. “The markets will bounce back, but it’s just a matter of when.”

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