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By Aliss Higham
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President Donald Trump's recent tariff announcements have caused chaos in stock markets.
A plethora of new duties were announced last Wednesday in a speech at the White House Rose Garden. A baseline 10 percent tariff has placed on all global imports, which began on Saturday, and further tariffs have been placed on a range of countries and trading blocs. A 104 percent tariff has been levied on China.
According to the Trump administration, the tariffs will seek to correct global trade imbalances that have disadvantaged the U.S. and motivate companies to relocate their manufacturing operations here.
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Unsurprisingly, the news has shaken financial markets across the world. On Wednesday morning, European markets all saw several percentage point drops. According to CNN's Fear & Greed index, U.S. markets are currently being driven by "extreme fear."
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The impacts of the trade upheaval will be felt by those with invested retirement funds such as 401(k)s and other investment accounts.
"Tariffs can significantly affect investment portfolios and retirement savings by increasing costs for manufacturing, tech and consumer goods sectors, potentially lowering stock prices and amplifying market volatility, impacting long-term vehicles like 401(k)s and IRAs," Phillip Battin, president and CEO at Ambassador Wealth Management, told Newsweek.
What Will Happen To My 401(K)?
The unfortunate truth is that the value of your investments will likely decrease. However, experts who spoke with Newsweek unanimously agreed on one point: People with retirement funds, regardless of where they are in life, should remain calm, not worry unduly about their invested finances, and not make any unnecessary withdrawals.
"For retired clients, while some portfolio movement is expected, most retirement plans are structured with 18 to 24 months of anticipated distributions held in very conservative investments," Faron Daugs, wealth advisor, founder & CEO at Harrison Wallace Financial Group said. "These assets are not subject to market swings, providing a cushion that allows time for markets to stabilize and recover from periods of volatility like we're experiencing now."
Withdrawing money early from your 401(k) is not recommended. Not only could you be subject to early withdrawal penalties if you're under 59, that money would no longer grow when markets bounce back.
Pawan Jain, interim chair at the department of finance, insurance and real estate at Virginia Commonwealth University, told Newsweek that while short-term volatility "is likely," any longer-term impacts "will depend on whether trade tensions continue to escalate."
"If they don't, much of this turbulence could prove to be temporary," he said.
This isn't a call to do nothing. To shore up your later-life finances, now could be a good time to take a look at your portfolio and see what can be done to cushion the blow.
"For those approaching retirement, this may be a smart time to reassess your asset allocation," Jain said. "Overexposure to sectors or international stocks vulnerable to trade disruptions can lead to unnecessary stress. On the other hand, younger investors with years to go before retirement are often best served by staying the course.
"History shows that making emotional investment decisions in response to political headlines often results in missed opportunities and poorly timed moves."
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