15 Ways to Protect Your Retirement Savings During the Coronavirus Outbreak

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While many people are panicking about their financial situation during the coronavirus pandemic, you can focus more on how to protect your savings and start planning a new scheme of economies. Whether you believe it or not, the novel coronavirus really changes the life of Americans in so many ways. So, not only does it affect our physical and mental health, but this coronavirus pandemic is having a major impact on our financial resources as well.

So, it is perfectly normal to be scared about your retirement savings during the COVID-19 pandemic and you have to know that you are not alone in this situation. But the good news is that you can protect your retirement savings if you keep calm and follow these tips! Read on for more info!

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Do not check your retirement account often

One of the most important things that you have to take into consideration if you want to stay away from financial panic is to resist the temptation to check your retirement savings account daily. In doing so, your level of anxiety will increase significantly and you will be demotivated. 

According to 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.”

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Read more about investing

You should take advantage of the time you spend stuck in the house and learn more about investing. All you have to do is to get some books, podcasts or online articles. You will be less stressed about your savings and you will be able to manage your money better. 

“Use it as an opportunity to learn,” said Dana Anspach, founder of financial planning firm Sensible Money and author of “Control Your Retirement Destiny.” If you want to read, she recommends “The Behavior Gap” by Carl Richards or “The Four Pillars of Investing” by William Bernstein.

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Do not sell your stocks

We have to admit that when we check our retirement or investment accounts and see the balance drop, we are inclined to sell our stocks and this is one of the most common mistakes people often make. But even though it might feel safe for you to do so, this is not a good choice. “Don’t throw money into cash and cement your loss,” Keady said.

To be more specific, if you choose to sell your stocks while they are down in value, you risk losing some money. Instead, you should give them a chance to return to normal and we bet that you won’t regret this decision in the long run.

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Do not forget to keep some cash for bad times

Normally, every person should have enough money in a retirement savings account to cover approximately half a year 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.

So, as you probably know it is recommended to have an emergency fund, but if you do not already have one, it is recommended that you plan one as soon as possible so that you do not spend all your money from the retirement savings when the hard times come or you have an emergency.

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Set your saving goals clearly

First of all, you should know exactly what your goals are and set them clearly. So, it is very important to make sure you really know how every account works and the goal you set for each one. “Focus on what the plan was for that money” and write it down, Keady said. “It makes it easier to stay the course.”

In other words, if you have a retirement savings account you should know exactly that it is just for retirement and how long you want to keep money in that account. And if you are saving for a car, a house or other shorter-term things, then your money should be in another savings account.

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Focus more on the future

When we are talking about retirement we automatically think about the future and this is what every person should do. Moreover, a retirement savings account should be about long term savings and you have to focus on that. “You have to look at the potential outcomes over five years, not over a few weeks or months,” Anspach said.

Even though the coronavirus pandemic is stressing us, we have to stay calm and do not make a wrong move in relation to the financial plan. When you feel down just think about this quote “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.”

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We can’t time the market

There are a lot of people who probably believe that switching the investments from stock to bonds is a great idea, especially during the coronavirus outbreak and then switching back to normal. But you can’t go back when stocks stop falling because you can’t fool the time. 

If you are not careful you could lose a lot of money. “The only way it works out is if you can buy back at a lower price than when you exited,” Anspach said.

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Do not stop contributing to your 401(k)

You should never stop contributing to your retirement savings plan during a crisis because you will regret this decision later. For instance, there are many people who stopped contributing to their retirement savings plan during the financial crisis in 2008 and it turned out to be one of the biggest mistakes. 

So, you should keep supplying your retirement savings account and increase your contributions. But why do you have to do this? Well, if you choose to invest more while the stock is down, you will have more benefits when everything will be back to normal. “This is a buying opportunity of a lifetime,” Anspach said.

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One hundred can be a lucky number… or rule

You should use the rule of 100 if you do not know the percentage of your portfolio that can be in the stock. “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.” Believe it or not, it is a great idea to invest in equities as you get close to retirement.

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Fund your 402(k)

One of the most important things that you should to during a financial crisis is to load up on stocks while prices are still 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.”

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Take advantage of isolation to boost your savings

Sometimes it is good to see the glass half full and stay calm, especially these days when the coronavirus pandemic is becoming more and more severe. 

For instance, you should see your isolation as an opportunity to save more money, because now you do not have to travel, shop and eat at the restaurant. You are spending less these days and saving more. 

It is the best time to increase your retirement savings account and pay your debt if you have. Do not forget to stay safe at home and follow the rules imposed by the government or doctors.

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Pay your debt 

Even though you are too scared to start investing or save some money for your retirement plan, you should focus on something that can help you when there is a possible financial crisis, such as paying your debt or 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.

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Focus on cash if you are near retirement

As I said before, every person should have an emergency fund for bad times, especially when there is a pandemic and it should be bigger if you are near retirement age. “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.

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Reduce your expenses

If you want to save more and increase your retirement savings account you should reduce your expenses and try to live on less. You should start with adjusting your withdrawals because if you do not do this, “that could put you in a risk situation of potentially running out of money,” Keady said.

In addition, now that we have to stay at home and take care of ourselves it should be easier to live on a budget.

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Think about yourself and stay calm

The truth is that we all panic and are stressed when we hear bad news and examples of people who sell their goods to live during the coronavirus pandemic. But you should think more about yourself and try to keep calm. “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.”

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1 Comment

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