--- title: Here's How to Protect Your 401(k) from the Next Big Market Drop description: It's understandable to be worried about a bear market, but you should choose a stock strategy for the long-term. authors: - name: Donna Rosato url: https://money.com/author/donna-rosato-3/ at_money_since: 2013 articles: 125 covers: - Investing - Career Advice - Housing - Insurance - Lifestyle - Mortgages - Personal Finance - Retirement - Taxes social: - https://x.com/RosatoDonna former_staff: true published: '2014-08-19T16:45:23.000Z' modified: '2024-04-16T04:13:07.000Z' section: Investing tags: - 401(k) - Ask the Expert - asset allocation - bull market - Investing - investing for retirement - Retirement - stocks - volatility word_count: 512 canonical: https://money.com/heres-the-right-way-to-protect-your-401k-from-the-next-big-market-drop/ type: Article source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![140605_AskExpert_illo](https://img.money.com/2014/06/140605_askexpert_illo.jpg) **Q: Bull markets don't last forever. How can I protect my 401(k) if there's another big downturn soon?** A: After a five-year tear, the bull market is starting to look a bit tired, so it’s understandable that you may be be nervous about a possible downturn. But any changes in your 401(k) should be geared mainly to the years you have until retirement rather than potential stock market moves. The current bull market may indeed [be in its last phase](https://money.com/has-bull-market-come-to-end/ "Money: Has the Bull Market Come to an End?") and returns going forward are likely to be more modest. Still, occasional stomach-churning downturns are just the nature of the investing game, says Tim Golas, a partner at Spurstone Executive Wealth Solutions. “I don’t see anything like the 2008 crisis on the horizon, but it wouldn't surprise me to see a lot more volatility in the markets,” says Golas. That may feel uncomfortable. But don't look at an increase in market risk as a key reason to cut back your exposure to stocks. “If you leave the market during tough times and get really conservative with long-term investments, you can miss a lot of gains,” says Golas. A better way to determine the size of your stock allocation is to use your age, projected retirement date, as well as your risk tolerance as a guide. If you are in your 20s and 30s and have many years till retirement, the long-term growth potential of stocks will outweigh their risks, so your retirement assets should be concentrated [in stocks, not bonds](https://money.com/401k-first-how-to-invest/ "Money: How to Invest Your First 401(k)"). If you have [30 or 40 years till retirement](https://money.com/collection-post/stock-and-bond-mix-needed-for-retirement-saving/ "Money: What's the right mix of stocks and bonds?") you can keep as much as 80% of your 401(k) in equities and 20% in bonds, financial advisers say. If you’re uncomfortable with big market swings, you can do fine with a smaller allocation to stocks. But for most investors, it's best to keep at least a 50% to 60% equities, since you'll need that growth in your nest egg. As you get older and closer to retirement, it makes sense to trade some of that potential growth in stocks for stability. After all, you want to be sure that money is available when you need it. So over time you should reduce the percentage of your assets invested in stocks and boost the amount in bonds to help preserve your portfolio. To determine how much you should have in stocks vs. bonds, financial planners recommend this standard rule of thumb: Subtract your age from 110. Using this measure, a 40-year old would keep 70% of their retirement funds in stocks. Of course, you can fine-tune the percentage to suit your strategy. When you're within five or 10 years of retirement, you should focus on reducing risk in your portfolio. An asset allocation of 50% stocks and 50% stocks should provide the stability you need while still providing enough growth to outpace inflation during your retirement years. Once you have your strategy set, try to ignore daily market moves and stay on course. “You shouldn’t apply short-term thinking to long-term assets,” says Golas. **For more on retirement investing:** Money's Ultimate Guide to Retirement ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/heres-the-right-way-to-protect-your-401k-from-the-next-big-market-drop/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Investing", "item": "https://money.com/investing/" }, { "@type": "ListItem", "position": 3, "name": "Portfolio Management", "item": "https://money.com/portfolio-management/" }, { "@type": "ListItem", "position": 4, "name": "Here's How to Protect Your 401(k) from the Next Big Market Drop" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/heres-the-right-way-to-protect-your-401k-from-the-next-big-market-drop/#webpage", "url": "https://money.com/heres-the-right-way-to-protect-your-401k-from-the-next-big-market-drop/", "name": "Here's How to Protect Your 401(k) from the Next Big Market Drop", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2014-08-19T16:45:23.000Z", "mainEntity": { "@id": "https://money.com/heres-the-right-way-to-protect-your-401k-from-the-next-big-market-drop/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/heres-the-right-way-to-protect-your-401k-from-the-next-big-market-drop/#breadcrumb" }, "dateModified": "2024-04-16T04:13:07.000Z" }, { "@type": "Article", "headline": "Here's How to Protect Your 401(k) from the Next Big Market Drop", "articleSection": "Investing", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2014/06/140605_askexpert_illo.jpg", "width": 2100, "height": 2100, "caption": "140605_AskExpert_illo" } ], "author": [ { "@type": "Person", "name": "Donna Rosato", "url": "https://money.com/author/donna-rosato-3/", "@id": "https://money.com/author/donna-rosato-3/#author", "image": "https://img.money.com/2014/05/140530_bio_author_rosato.jpg?quality=85&w=190&h=190&crop=1", "email": "donna_rosato@moneymail.com", "sameAs": [ "https://x.com/RosatoDonna" ] } ], "publisher": "https://money.com/#organization", "datePublished": "2014-08-19T16:45:23.000Z", "description": "It's understandable to be worried about a bear market, but you should choose a stock strategy for the long-term.", "abstract": "It's understandable to be worried about a bear market, but you should choose a stock strategy for the long-term.", "@id": "https://money.com/heres-the-right-way-to-protect-your-401k-from-the-next-big-market-drop/", "inLanguage": "en-US", "dateModified": "2024-04-16T04:13:07.000Z", "wordCount": 512, "keywords": [ "401(k)", "Ask the Expert", "asset allocation", "bull market", "Investing", "investing for retirement", "Retirement", "stocks", "volatility" ], "about": [ { "@type": "Thing", "name": "Investment", "sameAs": [ "https://en.wikipedia.org/wiki/Investment" ] }, { "@type": "Thing", "name": "Portfolio management", "sameAs": [ "https://en.wikipedia.org/wiki/Portfolio_management" ] } ] } ] } ```