3 Financial Moves NOT to Make During COVID-19
Most of America has been on lockdown for the past few weeks to help ease the fight against COVID-19. Many employees were laid off and most businesses are feeling the hit. Though Congress passed the CARES Act to help Americans stay afloat during this pandemic and economic crisis, it’s still not enough to return to a prosperous market. You’re probably wondering what you should do in response to a bear market. There’s the obvious don’t panic sell and avoid large financial purchases, but that won’t be enough to save most Americans from a potential repeat of the 2008 recession. Instead, consider avoiding these financial mistakes when creating your action plan.
Make Big Changes to Retirement Accounts If You’re Still Contributing
Retirement savers have probably noticed a lot of volatility over the past month, which can be frightening. Your first thought may be to pause contributions if you’re still contributing. You may also want to move it to cash. But beware, these actions will hinder potential growth. If you were laid off recently, you may be considering moving your money to an IRA or ROTH IRA, which would normally be beneficial. However, we’re not in “normal” times. The economy is in an uncertain financial state, and experts say the retirement game is changing moving forward. If you are moving an account into an IRA, you may be forced to sell your current holdings. You will have to wait for the check, deposit the money into the new account, and then reinvest it. Not only is this a lengthy process, but you’ll also increase your tax liability this way. This process typically takes weeks, which risks potential growth if the market bounces back while you’re awaiting the check. To avoid this, stay put for now and discuss your concerns with your financial advisor to implement a market recovery plan.
Aggressively Pay Down Debt
Now may seem like the perfect time to decrease your debt, but this isn’t necessarily true for everyone. If you don’t have a strong emergency fund, it would be more beneficial to contribute to that instead of paying down debt. In case of emergency, you may resort to using credit cards or taking out loans, which can bring you right back to where you started. Consider the current job market. As businesses continue to perform poorly due to COVID-19, unemployment will likely continue to rise. Though paying down debt is beneficial, without savings, you may end up in a worse situation than before you started to pay down your debt. Whether you have health insurance or not, you’re at higher risk for costly medical bills because of COVID-19. If you have a well-funded Health Savings Account, you’re in better shape but still may see higher-than-normal expenses caused by COVID-19’s impact on hospitals. With a solid emergency fund, you’ll know you’re covered in emergencies so you can focus on what matters most.
Ignore Your Retirement Plan
No matter your age, retirement planning should be on your mind. Younger planners have more time and less to lose in the short-term; those retiring within 10 years should be more concerned. Check-in with your advisor whenever you have questions or feel concerned. Though 10 years may seem like plenty of time, in “retirement planning years” that’s reduced to only a year or two. Stay proactive by asking your advisor about their market recovery strategy and how it works. A great financial advisor should custom design plans based on your situation, goals, and needs. It’s easy to ignore the problems if your retirement date is 5 to 10 years away by using the “market always recovers” excuse, but you aren’t a statistic and you may need extra care even when the market bounces back. The easiest way to ensure your dream retirement is by staying on top of your plan.
Financial Move You Should Make: Second Opinion
Whether you’re confident in your retirement plan or are considering a revamp, seeking a second opinion can potentially improve your retirement. Your current advisor may have good intentions but that doesn’t mean they know how to implement the best plan for you. If you had a serious health issue, you wouldn’t settle on the opinion of one doctor, would you? It’s time to treat your financial health with the same urgency as your physical health.
At RGA, we offer free virtual second opinion sessions to review your current portfolio against your goals. Through our custom analyses, we explain our findings and if necessary, propose ways to improve your plan through our personally crafted, math-backed proposals. To schedule a free, virtual, no-strings-attached second opinion session, click the link below, call 1-800-467-8152, or email firstname.lastname@example.org.
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