The COVID-19 pandemic is disrupting daily life, creating a wildly erratic economy, and changing the way Americans are handling their money.
Despite the current public health crisis, if you’re planning to retire soon, it’s important to remain focused on saving for your financial future. While you may be tempted to put your retirement planning on hold, one of the smartest things you can do is stay calm, take a deep breath, and stay the course.
In this article, we’ve compiled some helpful financial do’s and don’ts during this period of uncertainty.
Do continue to fund your retirement accounts.
The COVID-19 emergency isn’t the first health crisis our nation has endured. The stock market has been hampered before and although the world is currently running scared, there’s a strong probability that it will start to pick up once the infection slows. It may take weeks, months or longer. No one really knows, but eventually it will recover, so it’s smart to keep funding your IRA or 401(k). And in this period of social distancing, you’re staying at home now anyway. Why not take the cash you’d normally be spending on restaurants, movies, sports, and concerts and add it to your retirement plan instead?
Don’t look at your account balances too often.
Sure, we know that’s easier said than done.The economy is exceptionally stressed and volatile now, so there’s cause for concern. Still, there’s also every expectation that things will recover down the road. Studies from the University of California revealed that people who check their accounts habitually and trade frequently are more likely to make money moves that are detrimental to their overall financial security.
Do use the auto-rebalance feature on your 401(k).
An auto-rebalance typically occurs quarterly and can be a helpful feature if you’re attempting to adopt a “Set it and Forget It” strategy (per #2 above).
Don’t make big stock bets.
Driven by panic, stock markets around the world have dropped, tempting some people to make hefty investments. The bad news is that we don’t know how long it will take for the panic to pass or how much further down the values of the markets may go before the anxiety subsides. Investing on a longer time horizon means not worrying about buying dips and selling highs. And, studies demonstrate that buying and rebalancing assets for the long term is a sound strategy for those who are saving for retirement.
Don’t add more years to your mortgage if you’re refinancing.
Refinancing your mortgage to take advantage of currently plummeting interest rates can be worthwhile—as long as you don’t extend the term of loan. When you stretch out loan payments over a longer period, you pay more interest on the debt. Ultimately, the lower monthly payments you’ll enjoy may be offset by the higher lifetime cost of borrowing.
Do check with your financial advisor if you’re concerned or have questions.
We’re enduring an unusually stressful fiscal period and your financial advisor can be worth his or her weight in gold (no, we’re not advocating for a gold standard). These highly trained professionals are uniquely positioned to help clients by making mid-course adjustments to plans, staying focused on the bigger picture, creating contingency plans, and generally providing peace of mind in these uncertain times.
Keep saving, don’t trade too much, and don’t panic. FAI’s knowledgeable advisors can help protect your finances, even in the face of adversity. To learn more, please contact us.
About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life’s uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.