Volatility has returned to the equity markets with a vengeance. The Dow Jones Industrial Average has fluctuated by hundreds of points on many recent trading days. During these times your 401(k) plan participants can become very nervous.
Plan sponsors and their investment advisers should help participants
1. Don't stop contributing. Participants often contact me during times when the equity markets are falling so they can confirm that, "...now is a good time to stop making 401(k)
2. Don't make significant changes in your account. Many participants are pained to see the value of their accounts falling and feel the only way to stop the bleeding is to sell, before their investment falls even more. Realizing losses like this is a major reason most participants average less than half of the return of the funds they are invested in. Reassure your participants that markets rise and fall and that they are long-term investors who should not be concerned about short-term market fluctuations.
3. There is always help. This is a good time to share your investment advisers contact information with participants. Encourage participants who are thinking about making any sort of
4. Stick with your plan. Fast moving markets, either rising or falling, are not times during which major changes to saving and investment plans should be made. Emotions tend to color perceptions to a high degree during these times, leading to
5. Volatile markets do not last forever. Nothing good or bad ever lasts forever. Although it may seem like this latest period of market declines will never end, it will likely be over sooner than most think. Riding out the storm is usually the best bet.
In short, participants should hang on, hang in there and contact their adviser before making any changes.
Robert C. Lawton is president of Lawton Retirement Plan Consultants, LLC (
