How COVID-19 may impact your retirement planning
The world has been in a panic since the outbreak of coronavirus, causing almost unprecedented market volatility. Some have been quick to compare this to the credit crisis of 2008 that lasted five years. Depending on the duration of the health crisis, I foresee it more closely mirroring the financial events that followed the attacks on September 11, 2001—sharp drop in the market that recovered relatively quickly.
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.
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.
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.
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 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. 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.
Read related posts:
- Focusing on your financial goals and timeline during COVID-19
- CARES Act offers economic relief to employees and individuals
- Staying the course through COVID-19
Visit our market volatility resource center for a growing library of education and tools to help you navigate the uncertainty today and keep saving for your best life.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Voya. This material is not intended to provide legal, tax or
investment advice. All investments are subject to risk. Please consult an independent legal or financial advisor for specific advice about your individual situation.