Four Reasons You Should Consider Starting a Retirement Plan During a Volatile Market

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Every few years, for one reason or another, the stock market begins to plummet—and as a result, every few years, there’s widespread panic about a potential recession, what that may mean for Americans’ finances, and how it may impact the future of our economy.

But here’s the thing: the stock market is unpredictable. The only reliable prediction we can make about the stock market is that it’ll ebb and flow over time, with investments and stocks performing well during bull markets—and the opposite being true during bear markets. Most of us in the financial industry know that this happens regularly; it isn’t question of if, but when.

Why you should start a retirement plan during a bear market

Because of the negative correlation between bear markets and stock performance, many people mistakenly believe it doesn't make sense to start a retirement plan or start investing during a volatile market, but that way of thinking may be incorrect. Here's why:

The market is "on sale"

Have you ever heard the phrase "Buy low, sell high" in regard to stocks and investments? It's one of the most famous adages within the financial industry, and quite frankly, it oversimplifies making money in the stock market—but that’s not to say there’s no real value or truth to the phrase.

If you begin investing during a market downturn, you’ll likely be buying stocks for cheaper than you would if you started investing during a flourishing market. When investments and stocks perform well, they become more expensive; when the market plummets and stocks lose value, they become cheaper. Think about it this way: it’s almost as if you’re getting the "sale" price of a stock when you invest during a bear market.

So, starting a retirement plan during a bear market could give you and your employees the opportunity to start contributing while stock prices are still low (depending on the plan’s eligibility requirements), potentially resulting in more dramatic growth when the market eventually does start trending upwards.

Read more: Top Five Reasons to Consider Starting a 401(k) Plan This Year


Eventually the stock market will correct itself

We understand that it can feel like the end of the world when the stock market crashes or starts trending downward. But it's important to have a realistic understanding of the stock market and its natural tendency to flow between periods of intense growth and periods of intense loss.

While stocks can be very volatile in the short-term, it’s often worth it for investors to hang in there during periods of downward swings, with the average bear market lasting just 1.2 years and having an average cumulative loss of 33 percent, while the average bull market (growth period) lasts an average of five years with returns averaging a staggering 165 percent.1

While it’s impossible to predict just how long the bear market we’re currently in will last, when the market does correct itself and the investments in your plan start experiencing growth, your employees will thank you for giving them the opportunity to capitalize on those future gains.

Just remember: there's no guarantee of how long the market will stay down or that it can't sink further. Even though the market has historically rebounded after bear markets, there’s no way to promise that it will eventually swing upward or predict when it will happen.


Retirement plans can be good for your business too

As a business owner, you’re probably already aware that you may be eligible to receive a tax credit of up to $5,000 per year* for the first three years you offer a 401(k) plan to help cover start-up costs, but your business can benefit in additional ways besides just the tax credit.

First and foremost, many talented employees in the job pool expect to be offered the opportunity to save in a retirement plan by potential employers. A 401(k) plan is certainly a sought-after benefit—and if you don’t offer some type of plan to potential employees, you may be slashing your chance at recruiting and retaining top talent.

Plus, you can implement certain features within your plan, like safe harbor or profit sharing, to make the plan fit your business’ needs as well as your employees' needs.

You might also be interested in: Is My Business Too Small For a 401(k) Plan?


Retirement accounts help employees financially prepare for their future

If you don't already offer a 401(k) plan or similar retirement savings vehicle for your employees to save in, starting a plan becomes especially important if you’re concerned about their long-term financial wellbeing. In fact, a 401(k) plan is one of the main ways people save money for their future retirement, so opening access to a plan goes a long way in showing them that you have their best interests at heart—especially in financially-trying times.

And as we mentioned earlier, starting a plan during a market downturn allows employees to take advantage of "buying low" before investment prices have the chance to return to their normal state.


There are many reasons to consider starting a retirement plan for your business—even during a volatile market. If you’re looking for additional information about retirement plan options for your business or how Ascensus' flexible plan designs can align with your business goals, contact our retirement specialists at 800-345-6363.



1“How to Invest in a Bear Market.” Accessed August 30, 2023.
*Businesses may be eligible for a tax credit up to $5,000 of the administrative costs in the first three years of a new plan. Requirements for this credit include:

  • Plan must have less than 100 employees
  • At least one non-highly compensated employee must be participating
  • Employer must not have sponsored a qualified plan within the last three years

The startup credit is limited to 50 percent of a plan’s eligible expenses. The total annual credit can range from $500 to $5,000 depending upon the number of eligible non-highly compensated employees.

Ascensus recommends consulting with your accountant to discuss eligible tax credits available to your business. Credits outlined not applicable to Individual(k) plans.