In just a few months, the coronavirus managed to wreck health and the economy too. The value of your stock market portfolio, 401(k), or IRA might have plummeted because of it. And you had every reason to worry about what happened to your retirement savings when the market went up and down. But, there’s no need to panic during emergencies because it may instigate you to make rash decisions, which you would regret later.
Here’s what you should do to manage your retirement savings during troubled times.
Don’t make decisions based on emotions
No doubt, it’s a scary time. But avoid making financial decisions when you are panicking. Irrational decisions taken at this time can cause long-term consequences, which may adversely affect your retirement plan.
Don’t liquidate long-term investments
Your long-term investment vehicles are probably at a low point. And you’ll be tempted to liquidate them. But liquidating your long-term investments is a dangerous thing to do right now because when the market recovers, you will lose lots of money.
For most people, a 401(k) includes bonds and stocks, and since the market is in a downturn, pulling out savings essentially means selling low. Gather proper knowledge about how can you build a 401(k) retirement account.
So, stay with your investments. Remember, the stock market has always recovered from previous recessions or downturns. This time is no different. The more time you stay invested in the market, the better will be your chances of building retirement wealth.
Don’t make withdrawals from your retirement savings
It might get difficult for you to manage your finances with tightened budgets due to job loss or pay cuts. So, dipping into your retirement savings or your 401(k) plan can be a very tempting option.
Withdrawing from your retirement account reduces your savings and future earning potential. So, keep your retirement savings intact; instead, tap into your emergency fund or slash your budget.
Buy new investments
Invest in lower-cost stocks and sell them later at a high price.
If you are a self-directed IRA investor, you have the freedom to choose from a variety of asset classes that may be less risky than stocks. For instance, investing in precious metals is an ideal way to manage risk and diversify your investment portfolio.
Build a diversified portfolio
Consider diversifying your portfolio. Add new stocks of different companies to build a robust investment portfolio. You can also consider investing in different asset classes. Add safer but low-earning investments such as certificates of deposits, bonds, etc. to your portfolio.
Extend your work life
If you can still work, continue working as long as you can. Working longer has several benefits. For starters, it will help you recoup some of the losses you may have incurred. Also, consider delaying Social Security benefits.
- Don’t sell your investment when the market is volatile.
- Don’t think of quitting the stock market right away.
- Buy investments when stock prices are low.
- Diversify your investment portfolio.
- Work for as long as you can – delay retirement and taking Social Security benefits.
Have your finances been impacted by a shaky stock market? Please leave a comment below.