How to Protect Your Retirement Plans From Coronavirus Market Swings

Kelly Hernandez
An elderly couple sitting on a park bench wearing masks to protect against the coronavirus, looking worried about their retirement savings.

The unpredictability of the coronavirus has led some of the general public to alter travel plans, take time away from work, and worry about running basic errands in public places. Not only has it affected the way many live, the coronavirus has also had negative effects on the stock market and investments. Whether you’re approaching retirement age or just beginning to contribute to a retirement account, market swings caused by the coronavirus may have you concerned about your investments.

It’s normal for a global crisis or epidemic to negatively impact the stock market and cause it to swing inconsistently. In most cases, the market corrects itself over time and stability is restored. However, if you want to be proactive about ensuring your retirement plans come to fruition, there are a few steps you can take. By implementing these steps, you may feel your investments are properly secured and protected from current market volatility.

How Is the Coronavirus Changing Your Financial Plan?

The coronavirus has had obvious negative impacts on the public but additional effects may also occur in regards to your financial plan. If your employer closes the office to avoid the potential spread of the virus or you need to take time off because you’re ill, your finances may be impacted.

In some cases, you’ll be able to use paid sick leave or you may even be offered the opportunity to work remotely so you don’t have to use paid time off. However, if your employer doesn’t offer these benefits or you’ve already used your paid sick leave days, you may not earn enough income to cover your expenses. This dip in income can make it tough to pay off loans or credit card debts and you could find yourself in a financial emergency.

If you’re stuck missing work without pay, you may need to skip out on contributing to your retirement plan to make up for your lost income. If it takes you a long time to catch up with your original financial plan, you may be forced to reconsider your retirement age and how your plan will financially support you when you stop working.

Ways to Protect and Preserve Your Retirement

If your retirement money is invested in the market, it’s not immune to volatility and global issues, such as the coronavirus, that can shake things up. While there’s not much you can do about market peaks and dips, you can implement a few steps to ensure you’re protecting your retirement funds in the best way possible.

Stay Calm and Get Perspective

When the market begins to show volatility, investors may be tempted to pull their investments out. However, making rash decisions due to a global issue, such as the coronavirus, may cause you to lose out on the potential for profitability.

It’s important to stay calm, even if the market seems to be crashing. Your retirement funds are invested for the long term, so a short-term crisis is not the right time to make irrational decisions. By evaluating the situation and putting the coronavirus crisis into perspective, you’ll be able to continue making sound and profitable financial decisions.

Pay Living Expenses With Cash and a Budget, Not Your Retirement Portfolio

When the market is down, it’s important to remain financially stable. Create a budget that’s realistic and one that allows you to pay for your expenses with the income you earn each month. Living within your means is crucial when the market is down.

It’s also important to have an emergency fund that you can use in case you need to take time off from work or your employer closes their doors for a period of time due to the virus. Being able to pay your expenses with the cash you have set aside and your current income prevents you from doing serious long term financial damage.

If you pull from your retirement portfolio while the market is lagging, you’ll lose out on the profit you could have made off this investment when the market gains momentum again. You may also be responsible for early withdrawal penalty fees and taxes, depending on the type of investment vehicle you tap into.

Review and Consider Safer Investments

While you shouldn’t jump to conclusions or make rash decisions about your current investments, it may be a good time to analyze where your money is invested. Your investment portfolio may include stocks from several different international companies that could be affected by the coronavirus and its global impact.

If you’re concerned about the companies your money is invested in and how this virus will affect them in the market, consider diversifying your portfolio. Consult with your financial advisor and attempt to identify the companies that may quickly bounce back from this market slump. When it comes to investments, a more diversified portfolio is usually more helpful in the long term than putting all your money into one type of investment.

Evaluate Multinational Companies

Currently, the companies that are the hardest hit in the market due to the coronavirus are those that rely on businesses in foreign countries. China has slowed its manufacturing process, leading to supply chain interruptions worldwide. There are also strict limitations on travel. Therefore, multinational companies that rely on Chinese products or companies in the travel industry may find it hard to conduct business adequately.

If most of your retirement funds are invested in multinational companies that rely on Chinese manufacturing or travel, now may be the right time to evaluate where your money is allocated. Ensure your investments are diversified and not completely reliant on the performance of these specific companies.

Postpone Retirement

If you’re nearing your retirement age, the current state of the market may affect how your investments perform. If your investments have slumped with the market, you may find yourself living on a tight budget in your retirement years. To prevent this, consider postponing your retirement until the market bounces back.

It’s likely that once the coronavirus concern subsides, the market will steady itself and so will the value of your portfolio. While there’s no way to predict when the market will begin to gain traction, you may want to consider continuing to work until you feel you can live comfortably in retirement.

Concerns over the coronavirus have led to market volatility, which can be worrisome if you have a strict financial plan for retirement. By remaining calm about recent market movements and implementing these actionable steps, you can protect your investments and stay on track toward retirement.

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