Here’s what the generic “stay calm” advice won’t tell you: a 32-year-old and a 62-year-old should do almost opposite things when their 401(k) balance drops. One of them should quietly celebrate. The other needs a specific, careful plan. If you’ve been handed the same flat list of tips regardless of which one you are, you’ve been underserved.

The S&P 500 closed Q1 2026 down 5.1% — its worst start since 2022 — with trade policy uncertainty and tariff announcements among the factors weighing on markets. Your 401(k) balance may look worse than that depending on your specific mix. If your 401(k) is down and you’re wondering what to do, the answer exists. It just depends entirely on your age.

Disclosure: This article is for educational and informational purposes only and does not constitute personalized financial advice. Consult a licensed financial advisor before making changes to your retirement accounts.

The Number That Matters Right Now Is Not Your Balance — It’s Your Age

When the April 2025 tariff selloff hit and the S&P 500 lost over 10% in two days, Vanguard tracked exactly what its participants did. More than 93% stayed the course. But here’s the detail that doesn’t make the headlines: the typical investor who sold stocks was 56 years old. The typical net buyer was 43. Same market. Same news. Opposite reactions — and the buyers were right.

That age gap is the entire thesis of this checklist. Your balance is a lagging indicator of noise. Your age is the actual signal.

Before You Touch Anything: Two Rules That Apply to Everyone

Regardless of whether you’re 28 or 62, two things are true right now.

Rule 1: Do not sell into the drop. The DALBAR 2025 Quantitative Analysis of Investor Behavior found that the average equity investor earned 16.54% in 2024 versus the S&P 500’s 25.05% — an 848-basis-point gap driven almost entirely by poorly timed moves in and out of the market. That’s not a rounding error. Over decades, that gap compounds into a dramatically smaller retirement. As Benedict Guttman-Kenney, Assistant Professor of Finance at Rice University, put it: “A fantastic way to lose money is to sell in a panic.”

Rule 2: Market pullbacks are normal, not exceptional. Oppenheimer Asset Management’s research shows the average intra-year pullback over 35 years has been 13.95%. A drop in Q1 that feels alarming is, statistically, just a regular year in progress. And 78% of the market’s best single days occur during bear markets or the first two months of recovery. Investors who leave miss both the lows and the rebounds.

These rules don’t mean “ignore your portfolio.” They mean: stop before you act, and read your section below.

Ages 20s–30s: Your 401(k) Checklist (This Market Is Working for You)

If you’re in your 20s or 30s and your 401(k) balance is down, here’s the reality: you’re buying shares on sale. Every contribution you make right now purchases more shares than it did six months ago. This is how dollar-cost averaging (making regular fixed contributions regardless of market conditions) is supposed to work. You’re living the good version of it.

Your checklist right now:

  • Do not reduce your contribution rate. Every percentage point you cut now locks in the loss and removes future purchasing power at a discount.
  • Check that you’re getting your full employer match. If your company matches up to 4% and you’re only contributing 3%, you’re leaving free money on the table. Market conditions don’t change that math.
  • Ignore your balance for 30 days. Set a calendar reminder to look again on May 7. The emotional check-ins are not helping you.
  • Optional: consider increasing contributions if cash flow allows. This is not something you have to do — but for savers with flexibility, current prices make this the most productive time to put more in.

The one thing you do NOT need to do is rebalance aggressively toward bonds or “safer” assets. At this age, time is your most powerful asset. Reducing equity exposure now means reducing growth for 30+ years. That trade-off rarely works in your favor.

Ages 40s–50s: Your 401(k) Checklist (Check the Drift, Consider the Window)

By your 40s and 50s, you have real money in your 401(k) and a real stake in what happens to it. You also have time — roughly 15 to 25 years — but less tolerance for deep losses that don’t recover before you need to start withdrawing.

Your checklist right now:

  • Check your actual allocation. After years of bull-market growth, your portfolio may have drifted well past your intended stock percentage. A plan designed at 70% equities / 30% bonds might now sit at 85% / 15% without a single active decision on your part. Log in and look. (Some employer plans restrict rebalancing frequency or impose waiting periods — check your plan documents before acting.)
  • Rebalance if you’ve drifted more than 10 percentage points from your target. This isn’t about predicting the market; it’s about making sure your risk level still matches your timeline. If you don’t have a written target allocation, now is a good moment to set one.
  • Do not panic-sell your equity allocation. At 45 or 50, you still need 20+ years of growth. Locking into bonds and cash at current levels captures the loss and removes you from the recovery.
  • Review your target-date fund’s glide path if you use one. Most target-date funds (funds that automatically shift to more conservative allocations as you approach retirement) have already adjusted for your age. If your fund is labeled “2045” or “2050” and you’re 45–50, it’s likely already doing some of this work for you.

The question for your decade isn’t “should I get out?” It’s “am I positioned correctly for the risk I actually intended to take?”

Ages 55–65: Sequence-of-Returns Risk Is Real — Here’s What to Actually Do

This is the group that needs the most careful attention, and the most honest conversation. Vanguard’s data showed that sellers during the 2025 tariff selloff averaged age 56. That’s not random. People closest to retirement have the most to lose from a bad sequence of returns — the risk that a major drop right before or right after retirement permanently impairs your ability to withdraw without running out of money.

But moving everything to cash isn’t the answer either. Here’s what’s actually worth doing.

  • Assess your cash runway. If you plan to retire within 5 years, you should ideally have 1–2 years of living expenses accessible outside your 401(k) — in savings or short-term bonds — so a prolonged downturn doesn’t force you to sell equity at the bottom just to pay bills. If you don’t have that buffer, building it incrementally (not all at once) is your most important financial project right now. Not “one of” your most important. The most important.
  • Review your bond/equity split with your retirement date in mind. A 60/40 portfolio (60% stocks, 40% bonds and fixed income) is a common rule of thumb for this range, but your situation may differ based on pension income, Social Security timing, and other factors. Rules of thumb are starting points, not prescriptions. Your situation may genuinely warrant something different.
  • Do not make large allocation changes in a single day. If you need to reduce equity exposure, do it in stages over several weeks. This matters for emotional reasons (you might regret a sudden full shift) and practical ones (some plans restrict large reallocations or impose processing delays).
  • Check your plan’s rules before rebalancing. Many employer-sponsored plans have restrictions on how often you can change allocations or which funds you can move between. Know what you’re working with before you try to act quickly.
  • Consider delaying Social Security if you can. If market conditions push you to reconsider your retirement timeline, every year you delay Social Security past 62 (up to 70) increases your eventual monthly benefit by approximately 6–8%. Under current law, that’s a deferral benefit not subject to market fluctuation — though benefit structures are set by Congress and can change.

The near-retiree cohort benefits most from having a written plan already in place before volatility hits. If you don’t have one, making that appointment with a fee-only financial planner is the single highest-leverage action on this entire list. Not eventually. This week.

One Move Almost Nobody Talks About: Roth Conversion During a Market Downturn

When markets are down, a Roth conversion — moving pre-tax money from a traditional 401(k) or IRA into a Roth account — becomes more financially attractive. Here’s why: you pay ordinary income tax on the amount you convert, but at current lower share prices, you’re converting more shares for the same tax cost. When those shares recover and grow, all of that growth is tax-free inside the Roth.

Fee-only financial planners recommend this in exactly this kind of environment. Despite its potential advantages in down markets, this strategy rarely appears in mainstream market-volatility coverage.

If you’ve been thinking about your IRA options alongside your 401(k) decisions, the IRA contribution deadline and account-type decision framework is worth reading alongside this one — especially if a Roth conversion is on the table.

The caveats here are not optional:

  • A Roth conversion is irreversible. Once converted, you cannot undo it and get the taxes back. Not a “try it and see” move.
  • It creates immediate taxable income. The converted amount gets added to your ordinary income for the year, which could push you into a higher tax bracket, affect eligibility for income-based programs, or create other consequences specific to your situation. For context on how converted amounts interact with your overall tax picture, the 2026 tax deduction changes may affect your net cost calculation.
  • It only makes sense in certain income years. If 2026 is a lower-income year for you — maybe you changed jobs, reduced hours, or had other deductions — the tax cost of converting is lower. If your income is the same or higher than usual, the math changes significantly.

This is one where talking to a tax professional is genuinely necessary — not a disclaimer I’m adding for legal reasons. The strategy has real upside in the right situation and real costs in the wrong one.

What to Do in the Next 48 Hours if Your 401(k) Is Down

You don’t need a 10-step plan. You need one or two things to actually do.

  1. If you’re in your 20s–30s: Log into your plan, confirm your contribution rate, and make sure you’re capturing your employer match. Then close the tab. Do not reduce contributions.

  2. If you’re in your 40s–50s: Log in and find your current allocation. Write down the actual percentages. Compare them to your intended target. If you’ve drifted more than 10 points, check your plan’s rebalancing rules and set a calendar reminder to execute a rebalance — staged over several weeks, not all in one day.

  3. If you’re in your 55–65 range: Check your cash runway first. How many months of living expenses do you have accessible outside of stocks? If the answer is “not enough,” that’s the priority. Second: if you don’t have a written retirement income plan, make the call to a fee-only financial planner this week. The National Association of Personal Financial Advisors (NAPFA) is a good starting point for finding advisors who charge flat fees and do not earn commissions.

Market drops are uncomfortable regardless of your age. But discomfort and danger are not the same thing. For most people reading this, the real risk isn’t the drop itself — it’s the response to the drop. Know which category you’re in, do the one or two things on your list, and then step away from the screen.

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