Companies can take these 4 steps to help ensure that participants and retirees are not making fear‑driven mistakes, which could jeopardize their retirement.

  1. Consider adding target date funds to their lineup: TDFs are designed to accumulate savings over the working career of a retirement saver. TDF glidepaths incorporate typical market risks over the long term in its assumptions, so savers invested in TDFs don’t need to change their investment in response to market volatility. Our research shows that TDF investors are unlikely to make investment changes during periods of market volatility. This allows investors to avoid market timing risks and can help them grow their retirement assets. Higher adoption of TDFs could have a calming effect on investors who would prefer to rely on professionals for asset allocation decisions.

Investment Performance Varies Across a Range of Economic Environments

Source: T. Rowe Price. The diagram above is for informational purposes only and does not represent any investment recommendations. Past performance is not a reliable indicator of future performance.

2. Message to prevent investment mistakes: Our research shows that a small number of retirement investors may respond to market volatility by moving their assets to lower risk alternatives. As noted, this is risky because to avoid any losses they need to time the market correctly twice—once when moving out of higher risk growth seeking investments and then again when moving back into those assets. Plan sponsors should communicate this to their plan participants. They might also consider communicating that research demonstrates that many plan participants are staying the course, which might help calm peers who are anxious about responding to market volatility.

3. Provide emergency savings vehicles: Emergency cash reserves can help participants weather emergencies without setting back their retirement goals by reducing deferral rates or relying on loans or hardship withdrawals. Plan sponsors can set up emergency cash accounts for workers that allow for automated deposits through the payroll system.

4. Provide retirement income planning tools: Having a clear understanding of their retirement income sources and their sustainability can help participants see through times of volatility. Plan sponsors should work toward providing their retiring participants with a variety of retirement income solutions and tools and help them choose the solutions that meet their individual needs.

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This information is not intended as authoritative guidance or tax or legal advice. An investment in a target date fund is not guaranteed at any time, including on or after the target date, the approximate date when an investor in the fund would retire and leave the workforce. Target date funds gradually shift their emphasis from more aggressive investments to more conservative ones based on the target date. Investing involves risk including loss of principal. No strategy assures success or protects against loss.