Even as everyone is adjusting — to varying degrees – to the new normal caused by the coronavirus pandemic, employees approaching retirement—and even those already retired—are probably experiencing at least a little anxiety over what the stock market’s gyrations are doing to their retirement savings/pensions. After all, it’s not every day (fortunately) that the market takes a 3,000-point dive, even if it does recover some lost territory the following day.
We scouted around to see what suggestions there might be for people to get through the dizzying rollercoaster the market has become. Below you’ll find some possible coping strategies to suggest to retirement savers and the employers trying to calm their anxieties.
Not that it’s any consolation, but the whole world is in this one together. According to the Express, worried Brits could be in for a longer wait till retirement. Royal London’s Barry O’Dwyer is cited saying that while “[m]ost financial advisors will have moved their clients out of equities earlier,” thus preventing a hit to their pension/retirement savings, retirement assets heavily invested in the stock market could be in for some trouble, and some people may indeed have to defer retirement for a few years.
1. Be flexible.
The Motley Fool urges flexibility as the pandemic spreads and the market swoons. Even if you were planning to retire this year or next, it urges, consider doing just as O’Dwyer recommended: hold off for a year or two, if you can, and look at any positive opportunity that presents itself.
You might be able to claim your Social Security benefit later, for instance, and if you’re not already at full retirement age, postponing that would increase your benefit when you do claim. You’ll also have a chance to perhaps save a bit more and give the market a chance to recover its equilibrium.
2. Do some research.
Before you go into full-blown panic mode, says fin24.com, check to see whether your investment mix is actually relatively safely in an age-appropriate, lower-risk assortment of equities and bonds.
If your investments have been on autopilot with a plan that regularly rebalances your portfolio to keep pace with your age, your own situation may not be as bad as you fear.
3. Keep extra cash on hand.
If you’ve got it, set aside enough cash for as many months’ worth of bills as you can so that you don’t have to pull money from retirement accounts (possibly having to sell in a down market) to stay solvent in the months ahead.
Anyone nearing retirement, says the Motley Fool, should have a reserve of cash on hand as well as an emergency fund set aside to see them through potential scenarios like this one.
4. But not too much cash.
Forbes warns that in times like this the tendency is to cash out completely, for fear of losing even more—thus locking in whatever losses you’ve already sustained. If you panic, you could doom yourself to a lower pot of retirement money with no time to make it up later.
5. Keep a long-term view.
Losses early on in retirement can end up having an inordinate effect on the total sum of retirement savings, but if you can leave that money parked and use suggestion #3 above, your hard-won savings will have time to recoup whatever it can as the markets return to whatever will pass for normal in the wake of the pandemic.
Another fin24.com report points out that the effects other epidemics (ebola, SARS, MERS, Zika, etc.) have had on markets have generally not lasted beyond the six-month mark. So if you can look at the long term instead of panicking in the short term, your accounts will begin to recover.