Your 401(k) may look a little better than usual as tech stocks pushed the S&P 500 index to another all-time high as of market close on Thursday.
But now's not the time to change up your retirement saving strategy.
"You've got to remember you're investing for the long term. You're not supposed to be driven by market events," Douglas Boneparth, certified financial planner and president of Bone Fide Wealth, tells CNBC Make It.
Here's why: When you contribute money to a retirement account, such as a 401(k), that money is generally invested in a mix of various financial assets, including stocks. As the value of those stocks rises, so does the value of your investments, which is reflected in your account balance.
But if the market dips, so does the value of your 401(k).
One of the most common mistakes investors make is attempting to "time the market" by increasing their stock exposure during market upturns and investing "more conservatively" during down markets, Mike Shamrell, Fidelity's vice president of thought leadership, tells CNBC Make It.
Your retirement saving strategy should be proactive rather than reactive. Since the stock market is, by nature, unpredictable, it isn't wise to base your long-term investment strategy on how the market is performing in the short term.
"You can't predict exactly when that bull market becomes a bear market and vice versa," Shamrell says. "This unpredictability is exactly why it's generally a best practice to stay the course with your retirement savings and keep your contribution rate consistent when the markets are turbulent."
Focus on your retirement savings rate
Since your 401(k) can fluctuate or drop with market volatility, many advisors advise against focusing solely on your account balance. Instead, concentrate on what you can control: your retirement savings rate.
Your savings rate is the percentage of your pre-tax annual income you allocate toward your 401(k) or other retirement investment account. Fidelity recommends aiming for a savings rate of at least 15%, including any employer match.
But don't panic if you're not there yet. It's OK to start by saving what you can and increase your contributions over time.
One way to do this is by setting your retirement contributions to automatically increase by 1% each year until you reach the recommended savings rate. However, as you increase your contributions, be mindful of the latest retirement contribution limits.
It's important to get started sooner rather than later when it comes to saving for retirement. Even if you're only able to contribute a small amount, starting early allows you to take advantage of the power of compounding interest.
Ultimately, consistency is key when building up your retirement fund, says Boneparth.
"Markets go up and down, but your ability to stay invested is what allows you to compound your returns over the long term," he says.
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