MW 'Is it finally time to freak out?' I'm in my 50s and worried about the $650K in my 401(k).

By Quentin Fottrell

'Recession is in the air. The stock market is in a downward spiral.'

Dear Quentin,

Is it finally time to freak out?

I've read letters from people concerned about their retirement and losing their wealth due to Trump's trade war - and, yes, I do think it's a trade war (whether you agree with it or not). I am in my early 50s and have approximately $650,000 in a 401(k) and I am counting the days until I turn 591/2 so I can access it without paying a 10% early withdrawal fee. That, and Social Security.

I'm trying to hang in there with my job for the next decade or so, with the constant fear of being told, "It's time for you to go." This woman was worried about whether she should sell her shares and buy gold, but I don't have that luxury. I am just trying not to lose my cool. But forgive me for being dramatic. Recession is in the air. The stock market is in a downward spiral.

What do you recommend I do?

Not Feeling Calm

Related: Rising egg prices represent the cracks in the facade of our economic wellbeing

Dear Calmless,

Even stock-market spirals don't last forever.

As to your question (or fears) about a recession, you're right. That's what appears to be behind the latest tumble in the stock market. The S&P 500 SPX, Dow Jones Industrial Average DJIA and Nasdaq COMP all tumbled on Monday over lingering fears of a recession. And your 401(k) will take a hit. Heck, it already has. But while you can access it penalty-free at 591/2, you don't have to.

In an interview broadcast on Fox News on Sunday, President Trump refused to rule out a recession related to his tariffs, which analysts say contributed to the fall in shares. "I hate to predict things like that. There is a period of transition because what we're doing is very big. We're bringing wealth back to America," Trump said. That does not mean, it should be noted, that he can't and won't change his mind.

Here are positives: Trump has inherited, by most measures, a strong economy from former President Joe Biden. Inflation cooled after economists worried the economy was overheating, with the consumer-price index currently running below 3%. The tariffs, which most observers believe will heat up inflation, are not a given in their current form. The goalposts keep moving.

The tariffs, while most economists believe will push up inflation, are not a given in their current form. The goal posts keep changing.

We, in the U.S., have near full employment. Unemployment was 4.1% in February, up from 4% in January. Gross domestic product growth in the second quarter outperformed many economists' more pessimistic expectations due to persistently high interest rates and worries about the cost of living on everything from eggs to real estate. The labor-participation rate is also north of 80%.

The Federal Reserve Bank of St. Louis issues a regular report looking at the prospect of a recession in the U.S. Their indicator is based on real-time data. As you can see from this graph, the likelihood of a recession in 2025 is still slim. It peaked in mid-2020 and has been in steady decline this year. What can you do? Build up your emergency savings, pay off debts, rent a room if you have one to spare.

But there's no reason to sugarcoat the outlook because nobody knows for sure. Moody's chief economist Mark Zandi has upped his predictions of an economic downturn. "The risks of a U.S. recession starting in the coming year are uncomfortably high and rising," he said Monday. "I would put them at 35%, up from 15% at the start of the year." J.P. Morgan puts it at 40%, blaming "extreme U.S. policies."

Have you ever witnessed a person completely lose their cool, like, blow their top Mount Etna style? How do you react? Do you blow your top too?

"For context, the typical recession probability is 15% - the U.S. economy historically suffers a recession every six or seven years on average," he added. "The economy will likely suffer a downturn if the Trump administration follows through on the tariff increases it has announced and maintains those tariffs for more than a few months."

The New York Federal Reserve uses the spread between the 10-year and 3-month Treasury yield to calculate the probability of a recession over the next 12 months. It's currently at 58%, but it slowly falls to 29% in December. All of these predictions vary wildly and change, depending on the news of the day, hour, minute. One investor panics and sells, while another uses the opportunity to take a well-earned profit. And so it goes.

A recession, if it happens, even has a name. Some commentators are calling this the "Trumpcession." Uncertainty is a call to action and, as the aforementioned name suggests, if it happens, we have a handle on why it's happening. It will not descend on us like a bolt of lightning like the fall of Lehman Brothers in 2008. We have a pretty good handle on the causes, should a significant downturn occur.

Gold-standard advice

The net result of Trump's policies - from tariffs to cuts in federal jobs and spending, assuming they go ahead with the same gusto promised by the administration - are almost guaranteed to slow the rate of any Federal Reserve interest-rate cuts. And the geopolitical map is, indeed, changing with Trump's tough stance on Ukraine, which is out of step with other Western allies. In times like this, people turn to bonds and cash.

Here's the deathly dull, but gold-standard advice for your portfolio. "Avoid making big portfolio changes in reaction to the daily commotion," Martin Schamis, head of wealth planning at Janney Montgomery Scott in Philadelphia. "Focus on your financial plan. Given the current market conditions and uncertainty, investors should focus on those things that they can control."

"Evaluate your current allocation against your tolerance for risk," he says. "Given the long bull market we've been enjoying, you may be heavier in equities than intended. Consider rebalancing. Second, take a look at your expenses. Are there areas you can shift spending to increase savings? Having at least six months of expenses in reserve helps to separate your day-to-day needs from the volatility of the market."

There is an 'opportunity cost' of not holding stocks or bonds: just as interest rates have risen for cash in recent years, yields also rose across many types of bonds.

But don't feel too badly about your 401(k)'s wild ride. It's possible to hold too much cash, says Mai Capital Management. "Cash is not truly risk-free. First, inflation quietly erodes the purchasing power of cash over time. So even if yields appear to be high, the real value of your money could decline. The inflation-adjusted income on cash has consistently been negative when considering average certificate of deposit rates."

There is an "opportunity cost" of not holding stocks or bonds: just as interest rates have risen for cash in recent years, yields also rose across many types of bonds, Mai adds. "Unlike cash, these yields are longer-term in nature and these bonds could experience price appreciation if rates do decline." The more diversified you are in stocks, the less likely you will permanently lose your capital investment.

Social Security, since you bring it up, is another known unknown. Trump has previously said that not one "single penny" will be cut from Social Security during his tenure, but it's hard to know whether he will stick to that plan. Others say even that seemingly cut-and-dry statement is open to interpretation. It's expected to run into insolvency issues by 2035, just in time for its centenary.

There is plenty of profit-taking for the bears to enjoy. It's their honey, let them enjoy it. Your job is to manage and plan your future.

To be sure, the economy does bear an eerily similarity to that of the late 1990s dot-com bubble. There is plenty of profit-taking for the bears to enjoy, for now. It's their honey, let them enjoy it. Your job is to manage and plan for your future, not the short-term moves of the market. Uncertainty is a call to action. Diversify across different industries and regions of the world.

Tech stocks were hit hard in Monday's session. In 1999, the world was experiencing a surge in demand for new technology, one year before the dot-com bust. In 2025, AI has created a frenzy in Silicon Valley. The "Magnificent Seven" of tech stocks - Alphabet $(GOOGL)$, Amazon $(AMZN)$, Apple $(AAPL)$, Meta $(META)$, Microsoft $(MSFT)$, Nvidia $(NVDA)$ and Tesla $(TSLA)$ - collectively lost $759 billion in market cap Monday.

To your question about whether it's time to freak out. As the old saying goes, if you get into an argument with an irrational person, there are now two irrational people in the room. Have you ever witnessed a person completely lose their cool, like, blow their top Mount Etna style? How do you react? Do you blow your top too? Or do you remain very, very calm?

The clue, as always, is in the question.

Related: Why even cash is problematic for worried investors in this current state of chaos

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

More columns from Quentin Fottrell:

'I paid for everything from day one': My husband barely worked during our marriage. Can I leave my $500,000 IRA to my son?

'We are shocked and upset': My mother died and her second husband said he now owns everything. Is this true?

'I trust that my husband isn't a gold digger': I'm inheriting millions of dollars. My husband says I'm 'selfish' to keep it. Should I share it?

Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

MW 'Is it finally time to freak out?' I'm in my 50s and worried about the $650K in my 401(k).

By Quentin Fottrell

'Recession is in the air. The stock market is in a downward spiral.'

Dear Quentin,

Is it finally time to freak out?

I've read letters from people concerned about their retirement and losing their wealth due to Trump's trade war - and, yes, I do think it's a trade war (whether you agree with it or not). I am in my early 50s and have approximately $650,000 in a 401(k) and I am counting the days until I turn 591/2 so I can access it without paying a 10% early withdrawal fee. That, and Social Security.

I'm trying to hang in there with my job for the next decade or so, with the constant fear of being told, "It's time for you to go." This woman was worried about whether she should sell her shares and buy gold, but I don't have that luxury. I am just trying not to lose my cool. But forgive me for being dramatic. Recession is in the air. The stock market is in a downward spiral.

What do you recommend I do?

Not Feeling Calm

Related: Rising egg prices represent the cracks in the facade of our economic wellbeing

Dear Calmless,

Even stock-market spirals don't last forever.

As to your question (or fears) about a recession, you're right. That's what appears to be behind the latest tumble in the stock market. The S&P 500 SPX, Dow Jones Industrial Average DJIA and Nasdaq COMP all tumbled on Monday over lingering fears of a recession. And your 401(k) will take a hit. Heck, it already has. But while you can access it penalty-free at 591/2, you don't have to.

In an interview broadcast on Fox News on Sunday, President Trump refused to rule out a recession related to his tariffs, which analysts say contributed to the fall in shares. "I hate to predict things like that. There is a period of transition because what we're doing is very big. We're bringing wealth back to America," Trump said. That does not mean, it should be noted, that he can't and won't change his mind.

Here are positives: Trump has inherited, by most measures, a strong economy from former President Joe Biden. Inflation cooled after economists worried the economy was overheating, with the consumer-price index currently running below 3%. The tariffs, which most observers believe will heat up inflation, are not a given in their current form. The goalposts keep moving.

The tariffs, while most economists believe will push up inflation, are not a given in their current form. The goal posts keep changing.

We, in the U.S., have near full employment. Unemployment was 4.1% in February, up from 4% in January. Gross domestic product growth in the second quarter outperformed many economists' more pessimistic expectations due to persistently high interest rates and worries about the cost of living on everything from eggs to real estate. The labor-participation rate is also north of 80%.

The Federal Reserve Bank of St. Louis issues a regular report looking at the prospect of a recession in the U.S. Their indicator is based on real-time data. As you can see from this graph, the likelihood of a recession in 2025 is still slim. It peaked in mid-2020 and has been in steady decline this year. What can you do? Build up your emergency savings, pay off debts, rent a room if you have one to spare.

But there's no reason to sugarcoat the outlook because nobody knows for sure. Moody's chief economist Mark Zandi has upped his predictions of an economic downturn. "The risks of a U.S. recession starting in the coming year are uncomfortably high and rising," he said Monday. "I would put them at 35%, up from 15% at the start of the year." J.P. Morgan puts it at 40%, blaming "extreme U.S. policies."

Have you ever witnessed a person completely lose their cool, like, blow their top Mount Etna style? How do you react? Do you blow your top too?

"For context, the typical recession probability is 15% - the U.S. economy historically suffers a recession every six or seven years on average," he added. "The economy will likely suffer a downturn if the Trump administration follows through on the tariff increases it has announced and maintains those tariffs for more than a few months."

The New York Federal Reserve uses the spread between the 10-year and 3-month Treasury yield to calculate the probability of a recession over the next 12 months. It's currently at 58%, but it slowly falls to 29% in December. All of these predictions vary wildly and change, depending on the news of the day, hour, minute. One investor panics and sells, while another uses the opportunity to take a well-earned profit. And so it goes.

A recession, if it happens, even has a name. Some commentators are calling this the "Trumpcession." Uncertainty is a call to action and, as the aforementioned name suggests, if it happens, we have a handle on why it's happening. It will not descend on us like a bolt of lightning like the fall of Lehman Brothers in 2008. We have a pretty good handle on the causes, should a significant downturn occur.

Gold-standard advice

The net result of Trump's policies - from tariffs to cuts in federal jobs and spending, assuming they go ahead with the same gusto promised by the administration - are almost guaranteed to slow the rate of any Federal Reserve interest-rate cuts. And the geopolitical map is, indeed, changing with Trump's tough stance on Ukraine, which is out of step with other Western allies. In times like this, people turn to bonds and cash.

Here's the deathly dull, but gold-standard advice for your portfolio. "Avoid making big portfolio changes in reaction to the daily commotion," Martin Schamis, head of wealth planning at Janney Montgomery Scott in Philadelphia. "Focus on your financial plan. Given the current market conditions and uncertainty, investors should focus on those things that they can control."

"Evaluate your current allocation against your tolerance for risk," he says. "Given the long bull market we've been enjoying, you may be heavier in equities than intended. Consider rebalancing. Second, take a look at your expenses. Are there areas you can shift spending to increase savings? Having at least six months of expenses in reserve helps to separate your day-to-day needs from the volatility of the market."

There is an 'opportunity cost' of not holding stocks or bonds: just as interest rates have risen for cash in recent years, yields also rose across many types of bonds.

But don't feel too badly about your 401(k)'s wild ride. It's possible to hold too much cash, says Mai Capital Management. "Cash is not truly risk-free. First, inflation quietly erodes the purchasing power of cash over time. So even if yields appear to be high, the real value of your money could decline. The inflation-adjusted income on cash has consistently been negative when considering average certificate of deposit rates."

There is an "opportunity cost" of not holding stocks or bonds: just as interest rates have risen for cash in recent years, yields also rose across many types of bonds, Mai adds. "Unlike cash, these yields are longer-term in nature and these bonds could experience price appreciation if rates do decline." The more diversified you are in stocks, the less likely you will permanently lose your capital investment.

Social Security, since you bring it up, is another known unknown. Trump has previously said that not one "single penny" will be cut from Social Security during his tenure, but it's hard to know whether he will stick to that plan. Others say even that seemingly cut-and-dry statement is open to interpretation. It's expected to run into insolvency issues by 2035, just in time for its centenary.

There is plenty of profit-taking for the bears to enjoy. It's their honey, let them enjoy it. Your job is to manage and plan your future.

To be sure, the economy does bear an eerily similarity to that of the late 1990s dot-com bubble. There is plenty of profit-taking for the bears to enjoy, for now. It's their honey, let them enjoy it. Your job is to manage and plan for your future, not the short-term moves of the market. Uncertainty is a call to action. Diversify across different industries and regions of the world.

Tech stocks were hit hard in Monday's session. In 1999, the world was experiencing a surge in demand for new technology, one year before the dot-com bust. In 2025, AI has created a frenzy in Silicon Valley. The "Magnificent Seven" of tech stocks - Alphabet (GOOGL), Amazon $(AMZN.UK)$, Apple (AAPL), Meta (META), Microsoft $(MSFT.UK)$, Nvidia (NVDA) and Tesla $(TSLA.UK)$ - collectively lost $759 billion in market cap Monday.

To your question about whether it's time to freak out. As the old saying goes, if you get into an argument with an irrational person, there are now two irrational people in the room. Have you ever witnessed a person completely lose their cool, like, blow their top Mount Etna style? How do you react? Do you blow your top too? Or do you remain very, very calm?

The clue, as always, is in the question.

Related: Why even cash is problematic for worried investors in this current state of chaos

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

More columns from Quentin Fottrell:

'I paid for everything from day one': My husband barely worked during our marriage. Can I leave my $500,000 IRA to my son?

'We are shocked and upset': My mother died and her second husband said he now owns everything. Is this true?

'I trust that my husband isn't a gold digger': I'm inheriting millions of dollars. My husband says I'm 'selfish' to keep it. Should I share it?

Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

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