Market volatility always gets attention.
Headlines turn negative. Employees get nervous. HR teams start fielding more questions. In many cases, participants begin to wonder if they should sit on the sidelines and wait things out.
But the real issue is not the downturn itself.
One risk to long term retirement planning is missing periods of market recovery.
A Vanguard analysis helps put this into perspective. A $100,000 portfolio tracking the S&P 500 grew to about $4.9 million when it stayed fully invested over time. Missing just the 10 best market days, which often happen during periods of volatility, reduced that outcome to roughly $2.3 million.
That is not a small difference. It is a completely different retirement outcome.
Why This Matters for Plan Sponsors
This goes beyond investment performance. It is a behavioral and fiduciary issue.
When markets decline, participants tend to react emotionally. Some reduce contributions or stop altogether. Others move to cash and lock in losses. Many miss the rebound entirely.
For plan sponsors, this creates real challenges.
Retirement readiness declines
Employees who miss market recoveries often fall behind and may not catch up.
Workforce planning becomes more difficult
Delayed retirements can increase compensation costs and limit advancement opportunities.
Pressure on HR and leadership increases
Periods of volatility often bring confusion and a higher demand for guidance.
The Fiduciary Perspective
Many plan sponsors believe their responsibility ends with selecting a strong investment lineup. In reality, that is only part of the picture.
A sound fiduciary process also looks at whether participants are positioned appropriately, whether communication is effective, and whether employees have access to guidance when markets are uncertain.
It is not just about offering a good plan. It is about helping employees use it the right way.
The Real Risk: Decisions Made at the Wrong Time
Market declines are expected. They are part of investing.
The bigger concern is how participants respond during those periods.
Historically, some of the best market days occur shortly after the worst ones. These moments are nearly impossible to predict, and missing them can have a significant impact on long-term results.
This is where plan design and advisor support become critical.
How Leading Plan Sponsors Are Responding
Many employers are taking a more proactive approach.
They are communicating with employees during periods of volatility with clear, consistent messaging.
They are providing access to education and guidance when it is needed most.
They are reviewing plan design, including QDIA structure, to support long-term outcomes.
They are maintaining an ongoing fiduciary process that looks at both investments and participant behavior.
From Benefit to Business Strategy
The most effective retirement plans do more than check a box.
They support employee financial well-being, improve retention, and help manage long-term workforce costs. Most importantly, they help employees stay on track during critical moments.
Final Thought
Market volatility is inevitable.
Participant behavior is not.
The difference between the two is where thoughtful plan design and strong fiduciary oversight can make a meaningful impact.
Let’s Take Your Plan to the Next Level
If you would like to review how your plan is positioned, especially during periods of market volatility, I would be happy to connect.
Joe Trybula, CFP, CPFA, AIF
Managing Partner
Diversified Financial Advisors, LLC
Plan Design by Success