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Financial Education

May 4, 2020

Since the stock market plunged due to the worldwide spread of COVID-19, investors have experienced high levels of worry about investments in their 401(k) plans or individual retirement accounts (IRAs). Checking your retirement plan balance under these circumstances can be unsettling and sometimes counterproductive (especially if you let emotions drive your decision making). Paying too much attention to your plan balance and fluctuations can lead to overreactions and snap decisions that may jeopardize your long-term strategy.

Instead of making drastic moves to overhaul your investments, now may be a good time to take a healthy step back. For some people, that might mean ignoring the drama of day-to-day swings in the stock market for a while. For others, checking on their contribution rate (and continuing to make contributions, if possible) may be the best action to take.

However, this doesn’t mean completely ignoring all aspects of your retirement plan. You might want to rethink your contribution rate, review your investment goals or talk to a financial advisor about any changes needed. If you’re unemployed and facing a financial hardship or retired and need to tap into your retirement savings, you should discuss your next steps with a financial advisor. But if your long-term goals and investment strategy remain the same, a hands-off approach may help you stay the course.

Give It Some Time

Retirement plans are designed with set-it-and-forget-it features to help you keep saving through market ups and downs. Here are four benefits that stand the test of time:

Tax Benefits
Participating in your employer-sponsored retirement plan or contributing to an IRA gives you a low-cost, tax-advantaged way to save for the future. Contributing consistently to your plan can boost your long-term savings and help you stay on track for retirement.

Dollar-Cost Averaging
Investing regularly in your retirement plan allows you to buy fewer shares when prices are high, and more shares when prices are low.* A systematic investing strategy takes the emotion out of investing because you’re investing a set amount at regular intervals versus trying to time the market.

Automated Features
Some retirement plans make it simple by offering automatic contribution increases and automatic rebalancing to return your investments to their original target allocation. Check with your plan administrator to see if your plan provides these options.

Long-Term Perspective
Your retirement plan is built for the long haul. If you have years or decades before you plan to cash out of your retirement savings, then you’re in a good position to ride out volatility and take advantage of future gains in the stock market.

Get Professional Advice

We’re here anytime you need us for advice and market perspective. An annual portfolio review with a PeoplesWealth Advisors investment professional can help ensure you’re on track toward your goals.

* A systematic investment plan cannot guarantee a profit or protect against loss in a declining market. You should consider your financial ability to continue investing during periods of low price levels.

Investment products: Not federally insured. Not a deposit of this institution. May lose value.


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