How to protect your retirement savings during the coronavirus scare

If you’ve been saving for retirement, you’ve likely gotten used to watching your account balance steadily rise along with the stock market – that is, until the coronavirus hit. The spread of COVID-19 from China across the world has sent markets on a roller coaster ride. If you’ve bothered to check your retirement account balance, you’ve probably seen it on the same wild ride.

So what do you do if you can’t stomach the ups and downs? It’s not like you can simply strap in your retirement account and tell it to enjoy the ride. Or can you? Take a look at what you can do to protect your retirement account as the coronavirus impacts the market.

Last updated: March 23, 2020

Keep Calm

Hearing that the stock market has tumbled into a bear market can sound scary. It’s a period when stock values drop at least 20% from a recent high. Realize, though, that bear markets happen somewhat regularly. And they don’t usually last long.

On average, bear markets last about a year, according to investment management company Invesco. Over the past 60 years, the market has bounced back after every bear market and reached new highs. Keep this in mind if you start to feel panicked about the market.

Don’t Check Your Retirement Account Daily

Resist the urge to log on to your retirement account regularly to check your balance. It will do more harm than good, says Dan Keady, chief financial planning strategist at TIAA. “In market downturns, we’ve seen big downs and big ups,” he said. “If you’re putting yourself on this emotional roller coaster, it doesn’t make sense to increase your anxiety.”

Educate Yourself on Investing

Think of the recent market volatility as a reminder to brush up on your knowledge about investing. “Use it as an opportunity to learn,” said Dana Anspach, founder of financial planning firm Sensible Money and author of “Control Your Retirement Destiny.”

She recommends reading “The Behavior Gap” by Carl Richards or “The Four Pillars of Investing” by William Bernstein. Or you could learn about investing in uncertain times by listening to podcasts such as Money Tree Investing or Stacking Benjamins.

Keep Reading: 15 Money Podcasts You Should Listen To

Don’t Cash Out Stocks

If you are checking your retirement or investment accounts and are seeing your account balance drop, don’t be tempted to sell your stocks. It might feel like the safe thing to do, but remember that those losses are on paper only. “Don’t throw money into cash and cement your loss,” Keady said.

In other words, if you sell while your stocks are down in value, you will actually lose money. Hang on to your shares and give them a chance to bounce back.

But Keep Cash for Emergencies

Ideally, you should have enough cash in a savings or money market account to cover three to six months’ worth of expenses. “If people have put aside money that’s going to cover near-term cash needs, that should ease their minds considerably,” Keady said.

If you don’t already have an emergency fund, start building one so you don’t have to raid your retirement savings or rely on debt to get you through a tough time. You might actually have more cash in your budget you can set aside for emergencies if you’re spending has been curtailed by the coronavirus.

Get Clear on Your Savings Goals

If you have multiple savings and investing accounts, make sure you understand what the goal of each account is. “Focus on what the plan was for that money” and write it down, Keady said. “It makes it easier to stay the course.”

For example, if you have a 401(k), write that it’s for retirement and how many years it will be before you need the money in the account. If you’re saving for shorter-term goals, such as a down payment on a car or house, then that money should be in cash in a savings account.

Focus on the Long Term

When it comes to your retirement account, remember that you’re saving for the long term. “You have to look at the potential outcomes over five years, not over a few weeks or months,” Anspach said.

So stay the course you’re on rather than make a drastic move during this time of stress. Anspach said there’s a quote she saw that sums up what retirement savers should do now: “I’ve learned it’s best not to get off the roller coaster in the middle of the ride. Let it come to a stop.”

Don’t Try To Time the Market

You might be thinking you should switch your investments from stocks to bonds or even a money market account during this period of volatility then switch back once stocks stop falling. The problem with that strategy is timing.

“The only way it works out is if you can buy back at lower price than when you exited,” Anspach said. Most people don’t do that because they end up waiting until the market has recovered and stock prices are on the rise. As a result, they end up losing more money than if they had stayed in stocks.

Keep Contributing To Your 401(k)

One of the worst things retirement savers did during the 2008 financial crisis was they stopped contributing to their 401(k)s or other retirement accounts, Anspach said. Not only should you continue to contribute to your retirement account, but also you should consider increasing your contribution, she said.

If you invest more while the market is down, you’ll get more bang for your buck. “This is a buying opportunity of a lifetime,” Anspach said.

Learn: Why You Shouldn’t Worry When the Stock Market Tanks Your 401(k)

Make Sure Your Portfolio Is Diversified

The recent stock market volatility is a good reminder to have a diversified portfolio, which means having a variety of stocks (from small and large companies as well as international firms) as well as bonds and cash. This can help reduce your risk.

If you participate in a workplace retirement plan, see if that plan offers model portfolios of the investments available to you through the plan, Keady said. You could create your own portfolio based on one of the models. You also could opt for a target-date fund that will automatically adjust your stock and bond holdings as you near retirement.

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Use the Rule of 100

If you’re not sure how much of your portfolio to have invested in equities versus fixed-income assets such as bonds, use the rule of 100. “Take your age and subtract it from 100,” said Brandon Hayes, a vice president with oXYGen Financial. “This should tell you the percent of your portfolio that should be in equities and the rest in fixed income.”

Even if you don’t follow the rule closely and want to keep more of your portfolio invested in stocks as you age, it’s a good idea to reduce your exposure to equities as you get close to retirement.

Front Load Your 401(k)

You could take advantage of the big drop in the markets to load up on stocks while prices are low. “Don’t space your 401(k) or IRA contributions over the rest of 2020,” Hayes said. “If you have excess cash to invest, try to put away 100% of your paycheck and use your excess cash to pay your bills in a swap.”

Don’t Raid Your 401(k)

It can be tempting to turn to your retirement account as a source of funds if the going gets tough. But your retirement savings will take a huge hit.

For starters, the money you take out won’t have an opportunity to grow when the stock market rebounds. You’ll have to pay a 10% penalty on 401(k) and IRA withdrawals made before age 59 ½, plus pay income taxes on the withdrawal amount. If you take a loan from your 401(k) rather than a withdrawal, you won’t have to pay taxes. But you will have to repay the loan within five years — or immediately if you leave your job.

Avoid Debt

Be careful not to overspend and rack up debt as you stockpile food and supplies to get through the spread of the coronavirus. You’ll be left with less room in your budget to continue saving for retirement.

Take Advantage of Reduced Spending To Boost Savings

On the flip side, if you’re spending less now that you can’t go out or travel as a result of social distancing recommendations, you could boost the amount you’re saving. If you do have debt, focus on paying that down. Otherwise, give your emergency fund a boost and increase your retirement savings rate.

Consider Annuities

If you’re really worried about the impact that market volatility from the coronavirus will have on your retirement savings, consider buying fixed annuities, Keady said. These insurance products require a lump-sum investment. But they provide a fixed rate of return over a certain period of time regardless of how the market performs and a guaranteed stream of income in retirement.

Get a Guaranteed Return

If you’re too scared to invest now or boost retirement contributions, focus on paying down your mortgage. “Even if you have a low mortgage rate of 3% or 4%, paying off that mortgage can not only give you better peace of mind for retirement, but it is still potentially the best guaranteed return you’ll get on your money,” Hayes said.

Delay Retirement

If you were planning on retiring soon, consider delaying retirement to protect your savings from the coronavirus fallout. “For people in their 60s who haven’t retired, often just waiting one or two years can really change the numbers around,” Keady said.

Your retirement account will have more time to bounce back from market losses and grow if you work longer. And if you delay collecting Social Security benefits past your full retirement age, you’ll get a bigger monthly benefit check.

Shift Some Savings to Cash If You’re Near Retirement

Everyone should have an emergency fund. But that fund should be bigger if you’re close to retirement, especially given the current market volatility. “If you are nearing retirement, it is a good idea to store one year of cash for all of your expenses so you can let the rest of your investments grow and recover,” Hayes said.

Be Strategic With Retirement Account Withdrawals

If you’re already retired, be careful about the investments you sell now to generate income. Don’t sell stocks or stock funds that have fallen in value lately, Anspach said. Instead, sell bonds and bond funds and draw from cash reserves while the stock market is volatile.

Live on Less in Retirement

If you’re in retirement and your savings account balance has taken a hit, you might need to reduce the amount you’re withdrawing for income. If you don’t make adjustments to your withdrawals, “that could put you in a risk situation of potentially running out of money,” Keady said. Look for ways to temporarily reduce spending so you can live on less.

Put Things in Perspective

It’s hard not to feel panicked when you hear news reports about the Dow Jones Industrial Average dropping thousands of points in a day. Your emotional response is to sell before the losses get worse.

But ask yourself whether you’d act the same with other buying or selling decisions. “People don’t run out and sell their home when the market is down,” Anspach said. “People don’t apply the same mentality to stock investments.”

Get Professional Help

Rather than try to make decisions about your retirement savings on your own, get the help of a financial professional. Check with your employer to see if your workplace retirement plan offers advisor services. Or find a fee-only financial planner through the National Association of Personal Financial Advisors at or the Garrett Planning Network.

Know That the U.S. Economy Is Resilient

You’ve likely heard that the stock market isn’t the economy. Unfortunately, the ripple effects of the coronavirus will impact the U.S. economy. Keep in mind, though, that the economy was doing well before the coronavirus outbreak, Keady said. If there is a downturn or recession, the economy should rebound, he said.

Stay Positive

Don’t let negative thoughts about the market and your investments spiral out of control over the long term, Keady said. Otherwise, you’ll make short-term decisions you will regret. Stay positive and keep contributing to your retirement account. When things settle down, you will see a return on your investments, Keady said.

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This article originally appeared on How To Protect Your Retirement Savings During the Coronavirus Scare