A 401(k) gives you only a few levers: the fund menu, rebalancing, contributions and what you avoid. Here is what each one did in the last four selloffs, and how the answer changes with your years to retirement.
You protect a 401(k) with the few levers the plan gives you, decided before a crash rather than during one. Most plans offer a fixed list of funds rather than options or single stocks, so the choices are which funds you hold, how and when you rebalance, whether you keep contributing, and what you avoid. How hard to pull each lever depends on how many years you have until you start withdrawing. The wider toolkit is in portfolio protection.
| Lever | What it does in a crash | What to watch |
|---|---|---|
| Fund menu | Shifts part of the balance to stable value, money market or bond funds | Transfer limits between funds; bond funds can fall too |
| Rebalancing | Brings the mix back to target; trades inside the plan are not taxed | Selling stocks after a fall locks in the loss |
| Contributions | Keep buying shares at lower prices every paycheck | Stopping them also stops any employer match |
| Loans and hardship withdrawals | Best avoided: they sell shares at low prices | Taxes, penalties and a smaller base for the recovery |
| Years to retirement | Decides how much of the balance needs protecting | The years just before and after the first withdrawal matter most |
Data through the close of Oct 19, 2026. The S&P 500 fell 1.5% over the last five trading days, and the Nasdaq‑100 fell 3.7%. The S&P 500 is 1.6% below its record close of Oct 6: a small dip from its record. It is 6.1% above its 200‑day average (+8.0% a week earlier). Its 20‑day volatility is 9.6% a year, calmer than 70% of trading days since 2016.
Daily closes over the last year, through Oct 19, 2026. Green: the index above its average; red: below it.
Returns through Oct 19, 2026, dividends and interest included.
| Asset | Last 5 days | 1 month | Year to date | 1 year |
|---|---|---|---|---|
| T‑bills, 1–3 months (BIL) | +0.1% | +0.1% | +1.4% | +2.3% |
| Treasuries, 1–3 years (SHY) | +0.2% | −0.1% | −0.7% | +0.3% |
| Treasuries, 7–10 years (IEF) | +0.7% | −1.0% | −5.1% | −4.4% |
| Treasuries, 20+ years (TLT) | +1.8% | −1.7% | −7.5% | −8.6% |
| US bond market (AGG) | +0.5% | −0.9% | −3.5% | −2.8% |
| Gold (GLD) | −0.6% | −4.8% | −4.2% | +3.7% |
| Min‑volatility stocks (USMV) | +0.5% | +1.7% | +8.0% | +7.2% |
| −1× S&P 500 (SH) | +1.6% | −0.9% | −9.9% | −10.7% |
Last updated Oct 19, 2026. Members only.
| Exent regime pillar | Today |
|---|---|
| Liquidity | |
| Credit stress | |
| Economic cycle | |
| Sentiment | |
| Regime: Risk ON · Neutral · Risk OFF |
Price trend and volatility show what the market has already done. Exent’s macro regime score reads the backdrop behind it (liquidity, credit stress, the economic cycle and sentiment) and classifies it as Risk ON, Neutral or Risk OFF. Market intel members see today’s reading and get an alert when it changes.
Moving everything after a fall has a poor record; moving part of it by a rule set in advance holds up better. The biggest up days tend to arrive in the middle of selloffs. In the study (Jul 2016 – Sep 2026), missing the S&P 500’s 10 best days cut its return from 15.2% to 8.2% a year.
Most plan savers do not trade at all: Vanguard reported that only 5% of its participants traded in 2025, a volatile year. Those who do trade tend to move in a rush. In the April 2025 selloff, 401(k) trading ran at almost 10 times a normal day, the most since March 2020, as money left large US stock funds and target‑date funds for stable value, bond and money market funds, according to Alight data reported by Yahoo Finance. The S&P 500 was back at its old high on June 27.
Two plan rules matter before you move. Some plans bar direct transfers from stable value into “competing” funds such as a money market fund, and funds often limit frequent round trips. Check the plan’s rules first. For how to decide when to reduce risk, see when to step aside from the market.
A lot, and you pay for it in return. Mixes rebalanced monthly, Jul 2016 – Sep 2026, hypothetical, before costs (“bonds” is the US bond fund AGG):
| Portfolio | Return a year | Volatility | Worst fall | 2022 bear | COVID 2020 |
|---|---|---|---|---|---|
| 100% S&P 500 | 15.2% | 17.8% | −33.7% | −24.5% | −33.7% |
| 80% S&P 500 / 20% bonds | 12.4% | 14.3% | −27.7% | −22.4% | −27.7% |
| 60% S&P 500 / 40% bonds | 9.6% | 11.0% | −21.5% | −20.5% | −21.5% |
| 60% S&P 500 / 40% T‑bills | 10.1% | 10.5% | −20.8% | −15.0% | −20.8% |
| Illustrative $400,000 401(k) | Worst fall | Loss in dollars |
|---|---|---|
| 100% S&P 500 | −33.7% | −$134,800 |
| 80% stocks / 20% bonds | −27.7% | −$110,800 |
| 60% stocks / 40% bonds | −21.5% | −$86,000 |
| 60% stocks / 40% T‑bills | −20.8% | −$83,200 |
In 2022 the T‑bill version lost 15.0% against 20.5% for the bond version, because bonds fell with stocks. Over the whole period the 60/40 mixes returned about 10% a year against 15.2% for the S&P 500.
Contributions are the one lever that works in your favor during a fall: each paycheck buys shares at lower prices. In Fidelity’s data, the average 401(k) balance fell 3% from late 2024 to $127,100 in the first quarter of 2025, then rose 8% to a record $137,800 in the second, while only 5.5% of savers changed their asset allocation in that quarter, Yahoo Finance reported.
Rebalancing is the other. Moving money between funds inside a 401(k) is not a taxable sale, unlike in a brokerage account; tax comes when you withdraw from a traditional account. A rebalance after a fall sells bonds or stable value and buys stocks, back to the mix you chose. Many plans offer automatic rebalancing on a schedule.
Because they sell shares near the low and shrink the base that has to recover. The IRS rules add their own risks:
An emergency fund outside the plan is what keeps a crash from forcing either one.
| Years until withdrawals | What a crash means | What investors usually focus on |
|---|---|---|
| 20 or more | Decades of contributions buy at lower prices | Staying on plan; not selling |
| 10–20 | The balance is now large next to yearly contributions | A target mix and a rebalancing rule |
| 5–10 | Losses hit money you will soon start spending | Building bond and cash funds for the first years |
| Under 5, or retired | Withdrawals can lock in losses | Cash for near‑term spending; sequence risk |
The closer the first withdrawal, the more a crash can do lasting damage, which is sequence of returns risk. For the years around retirement, see how to protect retirement savings from a crash.
Moving everything on a forecast has a poor record, because the best days often come right after the worst. Investors who want protection often move part of the balance by a rule set in advance, with a condition for moving back.
A stable value fund aims to hold a steady value while crediting interest, so it protects the part you move. Check the plan’s transfer rules first: some bar moving money from stable value straight into a money market fund.
It depends on the mix. In Exent’s data since mid-2016, the S&P 500’s worst fall was 33.7%, a monthly-rebalanced 60/40 stock and bond mix’s 21.5%, and a 60/40 stock and T-bill mix’s 20.8%.
No. Exchanges inside a 401(k) are not taxable sales. Tax applies when you withdraw from a traditional account.
Contributions buy shares at lower prices, and stopping them also stops any employer match. In Fidelity’s data, average balances fell 3% in early 2025 and rose 8% in the next quarter.
A loan sells shares near the low. If you leave your job and cannot repay, the IRS treats the unpaid balance as a taxable distribution unless it is rolled over by your tax-return due date.
Market Intelligence reads the market regime and tells you whether the backdrop favors taking risk or protecting capital.
Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.