What to Do if Your 401(k) Drops in 2026 (While You're Working)

If your 401(k) dropped recently, the most effective response may also be the most uncomfortable: staying consistent.

Image Credit | mathisprod | Adobe Stock

Key Takeaways

• Market volatility is a normal part of investing, not a signal to change course

• Trying to time the market is difficult and often counterproductive

• Consistent investing (dollar-cost averaging) helps remove emotion from decisions

We experienced another round of volatility in March and April 2026. With so many headlines flying around, it’s easy to feel like something needs to be done.

While others may react out of fear, I view this as an opportunity for investors to reflect on their current plan and determine what to do next.

The Opportunity for Workers

To be clear, this message is for those who are still contributing to their 401(k)s and IRAs.

For those who are not contributing, you can refer to my prior post, “According to Plan,” where I discuss how we position retirees to weather situations like this.

"On Sale"

I previously wrote about booking flights for my New Zealand trip.

I bought my tickets thinking it was a good price—only to wake up a few days later and see flights advertised nearly $500 cheaper.

Naturally, I was more interested in the lower price, not the higher one.

But when it comes to investing, we tend to react the opposite way.

When prices are higher, we feel more comfortable putting money in. When prices drop, we hesitate.

Most people wait for the “right time” to invest but that moment is only obvious in hindsight.

Fortunately, we don’t need to time the market perfectly.

If you’re still contributing, your dollars are buying into the market at different prices (often referred to as dollar-cost averaging).

When prices are lower, those same dollars are buying more shares.

For simple math, let’s say you contribute $100. At higher prices, that might buy 2 shares. After a decline, that same $100 might buy 4 shares.

It may not feel good in the moment, but this is when your contributions are doing more work.

Review Your Time Horizon and Risk Tolerance

If a down market is causing alarm bells to go off, it’s a great time to review your time horizon and risk tolerance.

Time horizon refers to when you will need the funds. If you are planning to buy a home in the next year or two, a 20% drop in your account may impact that goal.

Fortunately, your 401(k) is for your retirement which may be ten, twenty, or even thirty years away. The events happening today may have little effect on your ability to retire.

Everyone’s risk tolerance and time horizon is different. Ensuring that your investments are intentional is a good starting point for peace of mind and the ability to weather the storm.

The Power of Doing Nothing

As I write this during ongoing geopolitical tensions, it’s easy to feel uncertain about what comes next.

The market may go up or down tomorrow.

But we can stay mindful of our investment plan and remain consistent.

If you’re unsure how your current plan holds up in a down market, feel free to reach out. We’re happy to help you think it through.

Scott H. Tonai CFP®

Wealth Manager, Director of Retirement Plans

Investment advisory services offered through Andrews Advisory Associates LLC, a registered investment advisor. This blog is not meant to give investment advice. Before investing in any advisory product please carefully read any disclosure documents, including without limitation, the firm’s Form ADVs. The information herein is provided for informational purposes only, and does not constitute an offer, solicitation or recommendation to sell or an offer to buy securities, investment products or investment advisory services. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit your financial status, risk and return profile or preferences. Investment recommendations may change, and readers are urged to check with their investment adviser before making any investment decisions.