While I do expect a turnaround as soon as the health risks have been mitigated through a vaccine or treatment, it is still important to have a plan in place to protect your financial future, especially if the economic damage of the virus takes longer to resolve than the medical crisis. Here is my advice on how you should react to the current state of the market, based on your retirement schedule.
COVID impact … if you’re already retired.
For those who are already retired, it is imperative that you allow the income planning and generation process to run its course. If you did a good job in your retirement planning and you have a strategy for your retirement income, keep the strategy. It should ideally have been designed so that any major event in the market would have a minimal impact long-term.
If you don’t have an income strategy or are unsure of what it is, now is the time to talk to your financial advisor.
COVID impact … if you plan to retire within the next 10 years.
At this point, you should already have assets positioned for future income. If not, now is a lousy time to sell any type of securities, particularly stocks. Instead, now is the time to check on the planning you’ve already done.
A dramatic market plunge can delay your retirement depending on how long the decline lasts. However, it shouldn’t be as extended a delay as the one many older workers experienced in the credit crisis of 2008-09. If you’re 55 planning to retire at 65, it may mean pushing to 67. Its unlikely to mean 75.
COVID impact … if you plan to retire in more than 10 years.
View this time as an opportunity. Keep doing what you’re doing—which hopefully means making regular contributions to retirement accounts.
One of the most common questions I have been receiving in the wake of COVID-19 is, “where should I put this large sum of extra cash?” My answer is to keep it. Now is not the time to sell securities, and it is also not the time to drop a big wad of cash into any investment.
If you’ve been working with a financial advisor, you should have a retirement plan that is designed to withstand this type of market volatility, even including what COVID-19 is inflicting. If you have not, it is time to learn from the current events and start taking your retirement planning seriously—whether you’re 25, 45 or 65. Find an advisor you trust so that you can be prepared for the next financial crisis. As always, my team of advisors is happy to answer questions and accept new clients.