401(k) retirement accounts take devastating hit as Trump tariffs spark stock market bloodbath

American savers are going through a difficult period, particularly those who are getting close to retirement. The impact of Trump tariffs and the imminent risk of a US recession is causing havoc in the stock market, causing significant damage to Americans’ 401(k) retirement accounts.

Several 401(k) retirement account holders are reporting thousands of dollars in losses over just two days of the stock market bloodbath last week. 401(k) account holders who had planned to rely on their retirement assets to get them through their golden years are facing the heat now.

On April 3, Trump was asked about rising concerns among Americans and whether he has checked his 401(k) since his tariff announcements shook the stock market. Trump said, “I haven’t checked my 401(k).”

401(k) savings go into various types of mutual funds, such as index funds or target date funds. 401(k) accounts’ value is directly linked to market changes, as they invest in stocks correlated with market performance, with the individual bearing all risk in investment decisions.

Studies in the past have shown that there could be short-term corrections and market crashes, but over the long term, equities drift upwards.

Those investors, including 401(k), who did not follow the de-risking strategy are in for a tough time. In the de-risking strategy, one has to start moving funds from highly volatile equities to less volatile debt funds when a goal such as retirement is near.

Last week, US markets saw over $6 trillion wiped out, leaving investors in a state of shock. Stocks lost a total $6.6 trillion in value on April 3 and April 4, 2025.

According to Dow Jones Market Data, the US stock market lost around $11.1 trillion of market capitalization since January 17, the Friday before President Donald Trump took the oath of office and began his second term.

The Dow Jones Industrial Average is down 11.9% since Inauguration Day, while the S&P 500 index is down 15.4%. The Russell 2000, the small-cap index, has fallen by more than 25% since reaching a record closing high of 2,442.03 on November 25.

401(k) is an employer-sponsored retirement savings plan with special tax benefits. Approximately 70 million Americans, or roughly 42% of the working population, utilize one to invest money for retirement. 401(k)s let you contribute part of each paycheck into a retirement account. Self-employed people can open a type of 401(k) on their own called a self-employed 401(k).

A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. The contributions or salary deferrals are excluded from the employee’s taxable income and even employers can contribute to employees’ accounts. At retirement, the earnings or distributions are includible in the taxable income of the employees. This is similar to the Employees Provident Fund for Indian employees.

For those who are still at least ten years away from retirement, this market downturn could be a nice opportunity to add more to the portfolio. For others, the de-risking process should begin when one is at least five years away from retirement.

Warren Buffetts of the world are known for their ability to generate wealth by being greedy when others are fearful, and fearful when others are greedy.