We all knew this time was coming. When we decided to invest in our future, we knew there would be a time when everything would seem to be going down; a sharp decline. The increasing spread of panic also doesn’t seem to help. Everyone is making decisions about their investments; pulling out money, and changing a lot of things to ensure that they don’t lose in the end. The question you need to ask yourself is: Is this the right thing to do? In this article, I’ll be telling you what coronavirus means for your retirement. It remains up to you to make the right decisions.
Coronavirus cases recorded around the world have been on a steady increase for weeks now. When you’re not thinking of buying face masks and hand sanitizers, you’re thinking about your future. If you will survive this, what happens if you survive this? Will you still be able to go on vacations and travel the world, or will you end up sitting in your living room with a bottle of beer in hand all day?
Before you begin to panic and fall into hysteria like everyone else, here are some things you should know.
- There have been major outbreaks around the world at different times. The world has experience the Spanish Flu, Hong Kong Flu, Bird Flu, AIDS Epidemic, Ebola, Swine Flu, SARS, and even wars such as the World War II, Korean War, and Cuban Missile Crisis. One thing you should remember is that you’re still living till this moment. The world did not end then, and it most likely will not end now.
- The stock market always comes back up. No matter how long this takes, it won’t make too much difference in the future, except you make a mistake now. Always look at your financial goals and time frames before making big financial decisions. Some of you still have up to 30 years before you plan to use your retirement income. What the coronavirus does to the stock market in the short time will not really have an impact in what happens in the long term.
Will Coronavirus Change Your Financial Plan?
It won’t if you don’t change it either. One of the main reasons why the stock market is falling is because of the panic. People are making changes that might affect them when this is over. If you haven’t made any of such changes to your plan, then you shouldn’t do such.
As said earlier, if you’re 30 years away from retirement age, you should be certain that the stock market will be higher in 30 years. Pulling your money out now will just ruin everything you’ve built. In the end, you’ll not be able to save enough to enjoy your retirement.
I would advice that you keep to your retirement plan. You won’t weather the storm when you panic and do something you shouldn’t do. If you don’t have any retirement plan, you should get one now. You can set up automatic contributions to your 401k and other retirement accounts, so you don’t really feel the impact of the money leaving your account.
Moreover, when your contributions are automatic, you don’t have to watch the growth. Whether it is rising steadily or on a decline, you don’t have to see. Just continue your monthly contributions (which you won’t feel after a while), and forget about the growth curve. When you make fewer changes to your portfolio, the less stressful everything is for you. Surveys have shown that the more you look at your investment, the more irrational changes you will make. This is bad for your overall financial security.
What’s the next step?
What you should do now is set up a meeting with your financial advisor. They should give you a breakdown of what safe actions you can carry out. But, you should not forget that they are humans. Your financial advisor could also be freaking out like crazy. They may tell you to go and sell everything and pull out all your money. If you try to reason with your advisor, and the advise remains the same, then it is time to change that advisor.
Remember; do not panic in times like this. They never last forever. The only problem is that we do not know how long this will last, and how further down the value of the markets will go. Still, don’t panic.
What Coronavirus Means for Retirees
So, you were already enjoying your retirement before the coronavirus hit the world. Now you’re worried that all those plans you’ve had may never be brought to fulfillment. Here’s what coronavirus means for your retirement.
- Lower interest rates on your savings account
The interest rate on your savings account will be lower due to the Federal Reserve’s interest rate cut. But, you can still look for savings accounts with higher interest rates than what you are currently earning. For example, the interest rates of online savings accounts are usually higher and they are also FDIC-insured.
- Retirement accounts have lost value
For retirees, seeing your account balance go down is a very terrible feeling. You may be tempted to pull your money out during this outbreak, but as I mentioned earlier, that’s not a good choice. Delaying withdrawals till the outbreak is over is recommended. It allows enough time for your account to recover.
This is one of the reasons I advise everyone to keep an emergency fund. With this, you have enough to take care of yourself until your retirement or investment account bounces back. Make sure you don’t touch your retirement account while it is depleted.
- Drop in recreation spending
This isn’t a bad outcome on your finances. Now that you’re staying at home, you can save more money on transportation, vacations, meals, and entertainment. You’re not going to be traveling or going out to have an expensive dinner with a lover for now. You can put this money into something else on your budget.
Stay Rational, Don’t Panic!
Now that you know what coronavirus means for your retirement finances, you can relax. Instead of panicking and carrying out terrible decisions, keep investing towards your retirement. Don’t stop saving your money.
You should even set up automatic contributions, so you can focus on other things and stop looking at your investments. Although the stock market value is dropping, it will rise in the long term and the effects on your investments won’t be as great as you think it will be.
So, stay rational. Stay safe.
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