‘Staying the Course’ Through Market Volatility

Two weeks after joint U.S.-Israeli strikes on Iran rattled global markets, retirement plan participants have sought guidance from financial professionals on whether to trade.

“An issue, for better or for worse, is that there’s always something going on,” says David Blanchett, head of retirement research at Prudential Financial and portfolio manager at PGIM. “It’s important for plan sponsors to communicate the importance of staying the course.”

Blanchett says the radical adoption of target-date funds, which offer multi-asset, long-term strategies that adjust based on a participant’s retirement year, dramatically improved the “stickiness” of 401(k) plans. The TDF market increased by 20.3% in 2025, reaching $4.8 trillion, according to a recent Morningstar report. Researchers have estimated TDFs hover between 40% and 50% of DC asset allocations.

While TDFs may offer comfort to participants of all ages, especially during times of market volatility, older participants—especially those closest to retirement—are those about whom Blanchett worries most.

Focusing on Pre-Retirees

In the wake of market volatility during the COVID-19 pandemic, older participants who invested more aggressively made the largest shifts to more conservative portfolios, according to research Blanchett published in the Retirement Management Journal. Meanwhile, those who transacted probably missed out on a rally in equities in the latter part of year.

Kelli Send, co-founder of and senior vice president of financial wellness services at Francis LLC, says pre-retirees are the cohort she has seen check their account balances most during times of market volatility. Seeing a relatively high balance drop elicits a more emotional response than that of someone earlier in their career, with less money in their account.

Blanchett’s research found that the probability of trading in 2020 was more related to having a higher balance than being older—though he noted the two are related.

To remove from the equation the temptation to trade, Blanchett says participants can use professionally managed accounts. His research found those using managed accounts were the least likely to trade. Older self-directed investors who seemed to make the least prudent investment decisions during the pandemic were the least likely to use a managed solution.

Blanchett also says plan sponsors might consider re-enrolling participants into a default investment—likely a TDF—if the markets get murky. When the market dropped in 2020, there was a notable fall-off in default investment acceptance rates among participants ages 60 to 70, to about 50% from closer to 90%, according to a study from the MissionSquare Research Institute. Default acceptance changed much less significantly for younger cohorts.

More Coaching Calls

Send recommends that industry experts coach participants on making trades with a game of “would you rather?”

“Would you rather get more conservative and miss out on upside, or stay aggressive and deal with some downside?” Send asks. “It’s a choice that depends on the individual,” though she recommends staying diversified when things get rocky.

Send adds that times of market volatility can serve as “gut checks” as to whether a participant is comfortable with their asset allocation. To alleviate concerns among a more anxious crowd, sans allocation changes, she recommends introducing to participants the “bucket method”: setting aside three years’ worth of income into a conservative investment.

Send says being silent about market volatility makes people more worried about what is going on—but that it is just as important not to sound an alarm.

“The biggest thing I would tell plan sponsors is to try to get ahead of it,” Send says. “Communicating right away goes a long way.”