Should You Move Your 401(k) to Cash in a Recession? What Experts Say

"Some pundits and skeptics are voicing real doubts about the S&P 500's ability to deliver a third straight year of twenty percent gains. Wells Fargo ( NYSE:WFC) senior market strategist Scott Wren sees a three-peat as unlikely. He has a 2025 target of 6,600, which translates to a return closer to ten percent and roughly eight percent from current levels. That is still a healthy outcome, even if it falls short of the past two years."

"This brings us to an investor featured on r/fatFIRE who is extremely anxious about what comes next. Convinced that a recession is imminent, they are considering shifting about ninety percent of their 401(k) into cash. That is a drastic move based on little more than a feeling. It is also not one I would recommend unless their personal financial situation has changed in a meaningful way, such as an unexpected medical cost or another major expense that needs near-term liquidity."

Some pundits and skeptics doubt the S&P 500 can produce a third straight year of twenty percent gains. Wells Fargo senior market strategist Scott Wren projects a 2025 target of 6,600, implying a roughly 8–10% return. An investor on r/fatFIRE considering shifting about 90% of a 401(k) into cash reflects recession anxiety, but such a drastic move is ill-advised absent a major, near-term liquidity need. The recent two-year market surge has been blistering and evokes late 1990s comparisons, yet since the late-2021 peak the S&P 500 has risen about 28.3%, aligning closer with long-term expectations.

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