Trump Says 401(k)s Are Booming. Here’s How a CPA Says to Shield Your Gains Before the Next Drop

You’re ahead now. The next step is making sure a market slide doesn’t hand it back.

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“Your 401(k)s are through the roof.”

That was President Donald Trump on Truth Social, posted shortly after noon on Nov. 4. In the same message, he said the “Stock Market just hit another Record High.”(1)

It was a major day for investors. The Dow rose 1,569 points, or 3%, after Democrats took control of both the House and the Senate in the midterm elections.(3)

On the surface, the numbers support his claim. Fidelity reports that the average 401(k) reached a record $155,800 as of June 30, climbing 10.5% in three months.(4)

Still, I’m not celebrating. I was a stockbroker during Black Monday on Oct. 19, 1987. That day, the Dow sank 22.6%, the largest one-day drop in stock market history.(5)

Could a shock like that happen again?

If you’re retired or near retirement, a strong run like this is the moment to secure some of your gains, not assume they will keep growing forever. Here are five moves I would make now.

1. See how much your allocation has drifted

When stocks rally, your portfolio becomes riskier without any action from you.

That is why it’s smart to rebalance regularly between stocks and more conservative holdings.

The SEC explains that rebalancing “brings a portfolio back to its original asset allocation mix” because “over time, some investments will grow faster than others.”(6)

Here’s an example. Suppose you started with a $500,000 retirement account split 60% stocks and 40% bonds. If stocks rise 25% and bonds do not move, you would now have $375,000 in stocks and $200,000 in bonds. Stocks would make up roughly 65% of the account.

If the market then fell by the same amount as in 1987, about $84,750 would disappear from that $375,000 stock position.

That is why this is an ideal time to speak with a professional, especially if your savings are substantial and retirement is approaching.

If you have $100,000 or more invested and you are unsure how your mix should look at your age, or how to protect your gains, a fiduciary advisor can help.

For example, SmartAsset offers a free service that matches you with up to three fiduciary financial advisors, who are required to put your interests first.

They can assist with tax planning, investing, Social Security strategies, and gaps in your plan you might not spot on your own. And first appointments are typically free. Free, expert guidance now, plus the chance to add a useful professional to your long-term team.

The questionnaire takes about 10 minutes, and it asks for a phone number near the end. You can provide it, but you control whether and when you respond.

2. Rebalance inside your 401(k) or IRA first

As a CPA, this is the first move I would make because it can usually be done without creating taxes today.

In a regular brokerage account, selling a winner often triggers a taxable capital gain. The IRS says that when you sell a capital asset, the difference between your basis and what you receive “is a capital gain or a capital loss.”(7)

Inside a traditional IRA, the rules are different. The IRS says amounts in a traditional IRA, including earnings and gains, generally “are not taxed until you take a distribution.”(8) The IRS also says 401(k) distributions, “including earnings, are includible in taxable income at retirement,”(9) which means trades inside the plan are not taxed as you go.

So reduce stock exposure and add to bonds or cash inside your retirement accounts first. Leave your taxable account for last.

One thing before we keep going — the financial world is louder and dumber than ever. Hot takes everywhere. Almost none of it is worth your time. I’ve spent 35+ years cutting through the noise so you don’t have to. Sign up for the free Money Talks Newsletter — 10 seconds, no spam, just the stuff that matters.

3. Put the next few years of spending somewhere dull

In my view, the real threat of a retirement crash is not the headline loss. It is being forced to sell stocks at the bottom just to cover everyday bills.

That is why money you expect to spend over the next few years should not be in the stock market. Move some of today’s gains into cash or bonds you will not need to sell during a downturn.

For the cash portion, compare what online banks are paying. One option to check is Barclays Online Savings. Be sure to look at the current rate before moving money.

4. Sell a little of a big winner, even if you like it

I follow this advice myself. I have made roughly $800,000 on Apple stock from a $1,700 investment made 25 years ago. I have sold some shares over time, but I still own more than $300,000 worth.

Why sell? I reduced the position because it had grown into too large a share of my portfolio. In short, too much of my money was tied to one company.

If one stock or one fund now dominates your account because it has had an excellent run, take some profits. You do not need to identify the exact top to be glad you acted.

5. Don’t sell everything

Trimming a position is not the same as heading for the exits. Dumping everything at a record high is just market timing in reverse, and no one can consistently call the top or know when to get back in. That includes me.

The goal is to build a portfolio you can live with if the market falls hard next month, while still allowing it to grow if it does not.

My honest view

President Trump is correct that many 401(k)s look excellent right now. Enjoy that.

But I have seen how quickly the mood can change. In 1987, one day erased more than a fifth of the Dow. Records are a gift, not a promise.

So take the gift. Rebalance, set aside the money you will need in the next few years, and let the rest stay invested. Talk to an expert. If the market keeps climbing, you still benefit. If it does not, you will sleep better at night.