With Investments Down, Here Are 5 Ways Employees Can Make the Most of Their Retirement Accounts

You can still set yourself up for a secure retirement even with the market going down.

In 2022, the stock market has seen major declines. In fact, the market was down 20% off recent record highs, which means it is officially classified as a bear market.

If you've seen your investment balance fall, you may be frustrated with your efforts to save for a secure retirement. But the good news is, you can still make the most of your retirement plan and set yourself up for a secure future even during this recent downturn. Here's how.

1. Take full advantage of any employer match

If you have a 401(k) at work, you should make sure you learn what the rules are for receiving matching contributions from your employer. Many companies match the money you put in, up to a certain percentage of your pay. If you can take advantage of an employer match, you get a guaranteed return on your investment that could be as much as 100% if your contributions are matched on a dollar-for-dollar basis.

Regardless of how the stock market is doing, you should absolutely invest enough in your retirement account to earn your full employer match. Not doing so would mean passing up guaranteed free money.

2. Be strategic about your tax breaks

Many retirement accounts come with tax breaks, but the rules on when you get that savings differ. If you invest in a traditional 401(k) or IRA, for example, you may get an upfront deduction in the year you make the contribution. You save money on your taxes now but have to pay taxes on withdrawals as a retiree. But if you invest in a Roth IRA or Roth 401(k), you don't get any tax benefits now but you take tax-free withdrawals, so you save later.

Think about what you think your tax situation will be in the future versus right now so you can be strategic about which account you use. If you believe your taxes will be higher as a retiree, a Roth may be better. And, if you are currently investing in a traditional account and your account balance is down, it might be a good time to consider a conversion to a Roth account. This has tax and other financial consequences, so talking to a financial advisor about potentially making this move could be a good idea.

3. Watch out for account fees

When your investments are not performing well, the last thing you want to do is reduce the returns you earn further by paying high fees. So make sure that whatever you are invested in, the expense ratio is relatively low. If your workplace 401(k) charges administrative fees, you may also want to invest only enough in it to get your full employer match and then open a different tax-advantaged retirement account at a brokerage firm, such as an IRA.

4. Make sure you're choosing the right investment mix

You don't want to be exposed to too much -- or too little -- risk in your retirement account. That's especially important when the market is volatile. So be sure you have the right asset allocation given your investing timeline. If you aren't sure how to figure that out, a general rule is to subtract your age from 110 and make sure that percentage of your portfolio is in stocks.

5. Keep investing and don't react based on fear

Finally, you should make sure to continue investing regularly even during a downturn and avoid selling investments you're still confident about. If you sell during tough economic times, you could lock in losses when you would have made the money back during an inevitable recovery that always follows a downturn.

By following these five tips, you can make sure you're doing the right things to build your retirement account, and you can be confident in your future even during the bear market.