3 ways 401(k) savers can keep their cool during challenging times

It can be tough to remain financially confident in the face of high inflation, choppy markets, and economic uncertainty. That came across loud and clear in the data we collected in Schwab’s annual 401(k) Participant Survey.

The findings show that the bar for 401(k) savers is going up as the environment for saving has become more challenging. Currently 401(k) savers believe they need to have $1.8 million saved for retirement, up from $1.7 million last year. At the same time, the number of workers who see inflation as a barrier to saving for retirement has increased significantly from 45% last year to 62% this year. Additionally, more than four in 10 (42%) workers see market volatility as a barrier to saving in 2023, up from 33% who said the same last year.

Market and economic cycles change over time, of course. But it’s important to have strategies to remain disciplined, on track and confident during uncertain periods. Here are some steps you can take to help you feel more secure in the current environment.

Adjust your plan to confront inflation and market volatility

Start by following some fundamental saving rules.

If you have a 401(k) plan, aim to contribute at least enough to get your full employer match. Anything short of that is like leaving money on the table.

If you’re carrying credit card debt with a high interest rate, pay off as much of it as you can each month. Maintaining high balances can cost you hundreds or thousands of dollars in interest alone each year. That can create a significant drag on the rest of your financial plan.

Put an emergency savings fund in place. These are made for periods of uncertainty. A good goal is to have enough saved to cover three to six months of rent or mortgage, utilities, food, and transportation. That’s a stretch goal for many, but start saving what you can once you have any high-interest debt under control.

Develop a spending plan. Track what you’re buying each month to identify areas where you may be overspending. That can make it easier to find ways to change your spending behavior.

According to Schwab’s 2023 Modern Wealth Survey, seven in 10 Americans who have plotted their goals and documented a financial plan said it made them feel more in control of their finances, and nine in 10 said they feel confident they will reach their financial goals. 

Stay disciplined

Remember that retirement saving is an exercise that should be measured in decades, not weeks, months, or quarters. Behavioral science tells us that investors are more likely to react emotionally if they see their retirement account balance trending downward. But it’s important to avoid making emotional decisions that potentially could take a financial plan far off course. The same logic applies when balances are trending upward. Limit how often you check your retirement account balance to help prevent your emotions from guiding your financial decision-making.

That doesn’t mean you should bury your head in the sand and pay too little attention to your retirement accounts. You can moderate by creating a regimen to stick to in up and down cycles, not overreacting to dips and spikes, and rebalancing as necessary. It’s a marathon, not a sprint.

Seek guidance

Those with 401(k) accounts tell us their confidence making 401(k) investment decisions nearly doubles with help from a professional. You can often access 401(k) guidance for low or no cost through your employer.

Depending on the specifics of your plan, you likely have a range of resources, education and even specific advice available to you. Drawing on it can help you find answers to common questions like calculating how much you need to save, how to invest your account, and how much you might expect to have at retirement.

You got this

Inflation, market volatility and economic uncertainty can make for difficult conditions, but today’s landscape is by no means unprecedented. Saving for retirement doesn’t occur in a straight line, up and down economic cycles are unavoidable over the arc of a 30- or 40-year career. But approaching your finances with the right tools and help can increase your confidence and put you in a stronger position to navigate current conditions.

Brian Bender is Managing Director and Head of Schwab Workplace Financial Services.

Workplace Financial Services is a business enterprise which offers products and services through Schwab Retirement Plan Services, Inc.; Schwab Stock Plan Services; and Designated Brokerage Services. Schwab Retirement Plan Services, Inc., provides record-keeping and related services with respect to retirement plans. Schwab Stock Plan Services is a division of Charles Schwab & Co., Inc. providing equity compensation plan services and brokerage solutions for corporate clients. Schwab Designated Brokerage Services (DBS), a division of Charles Schwab & Co., Inc., provides technology solutions for corporate clients with regulatory requirements to monitor employee security transactions. Schwab Retirement Plan Services, Inc., and Charles Schwab & Co., Inc. are separate but affiliated entities, and each is a subsidiary of The Charles Schwab Corporation.


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