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Mon, May 5, 2025, 10:32 AM 5 min read
The U.S. stock market has always been a rollercoaster, but on some days lately, the ride has felt more like a freefall — and many retirement investors are panicking.
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March 2025 marked the busiest month for 401(k) trading activity since the early COVID-19 market crash in October 2020, according to Alight Solutions. Nearly half the days saw above-normal trading. The trigger? Possibly a perfect storm of market volatility, high interest rates, and political uncertainty tied to President Trump’s latest economic policies.
Faced with flashing red numbers on their screens, many 401(k) participants are yanking their money out of stocks and rushing toward what they hope are safer havens. But while the urge to protect your nest egg is understandable, following these jittery retirement savers might just set you up for even bigger losses later on.
According to the latest Alight 401(k) Index, the flows were unmistakable. Outflows were primarily from U.S. large-cap stock funds and target-date retirement funds, typically the backbone of long-term portfolios. Meanwhile, inflows mainly surged into stable value funds, bond funds, and money market funds.
Stable value funds were the biggest winners, pulling in about 40% of the month’s trading inflows. Offered only in retirement plans, these funds contain high-quality short- to intermediate-term bonds and are designed with insurance wrap contracts to protect both principal and accumulated interest. This means upon withdrawal participants are guaranteed both even if the bonds in the fund declined in value.
It's essentially the financial equivalent of crawling under the covers during a thunderstorm. “It can be a good risk mitigator if you have already built your nest egg and you’re trying to maintain it,” said Jania Stout, president of Prime Capital Retirement & Wellness, to CNBC about these assets.
Younger investors are new to giant market swings and might panic, causing higher trading activity, Alight analyst Rob Austin told the National Association of Plan Advisors. “It’s the first time they see their 401(k)s decline. They pull it out to put it into something safe. Unfortunately, though, they did it now when stocks have already gone down, which is what we typically see. People don’t get back into equities until after they’ve rebounded. So, it’s buying high and selling low. That’s really what’s happening.”
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