Since U.S. and Israel strikes against Iran, oil prices have risen and stock markets have fallen as investors fret about the conflict’s trajectory and economic impact. The Dow Jones Industrial Average is roughly 9% below its February high — well short of a 20% drop that defines a bear market — but the slide has reduced the value of many Americans’ investment accounts, from college savings to retirement funds.
What to do depends on when you’ll need the money.
A decade or more from needing to withdraw: Hands off
If you don’t plan to tap those funds for 10 or more years, advisers say the best move is usually to leave your accounts alone. Markets have repeatedly recovered from major disruptions — sometimes within months, sometimes over a few years — and reacting emotionally to a short-term drop can lock in losses. As Steven Elwell, chief investment officer and co-owner of Level Financial Advisors, warns, it’s easy to talk about “buy low, sell high,” but much harder to act when markets are frightening.
For long-horizon investors, downturns can be opportunities to buy stocks at lower prices. But Elwell cautions that markets can fall further before they recover, so adding to positions requires the stomach to tolerate more volatility.
Within a few years of retirement: Rebalance toward safer options
If retirement or planned withdrawals are only a few years away, the market should recover before you need the cash — but you should prepare for the next shock. That generally means shifting some holdings from volatile stocks into more stable assets like U.S. Treasury bonds. Many retirement investments do this automatically through target-date funds, which gradually reduce stock exposure as the target year approaches.
College savings plans like 529s often follow a similar glide path; Morningstar has found the majority of 529 plans adjust allocations as the beneficiary’s graduation date nears. Diversifying across U.S. and international stocks and bonds also spreads risk and can capture returns when some regions outperform others. International funds outperformed the S&P 500 last year in some cases, though some foreign markets are lagging this year amid the Iran conflict. For long-term investors, buying international exposure at a discount can be advantageous, says Michael Budzinski, a Morningstar portfolio manager.
Need the money now: Be as rational as Spock
If you must withdraw funds amid a shaky market and haven’t previously shifted into safer assets, there are steps to reduce damage. Kevin Khang, head of Vanguard’s global economic research team, suggests withdrawing from the account or fund that’s holding up best rather than selling the biggest losers. Selling the worst-performing holdings locks in larger losses and robs those investments of a chance to recover.
Withdraw only what you need and leave as much invested as possible to benefit from future rebounds. Christopher Holtby, co-founder of Wealth Advisors Trust Company, recommends a highly rational approach: cut expenses, delay retirement if possible, and avoid selling into panic. “Mr. Spock would be telling you to do things that are extremely rational and might be painful,” Holtby says, because selling when others are selling can magnify losses.
Bottom line: Your response should match your timeline. Long-term investors generally should avoid knee-jerk moves and may use dips to add risk exposure, those nearing withdrawals should shift toward stability and diversification, and people who need cash now should prioritize preserving recovery potential and making rational, measured choices.
