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Coronavirus Victims Now Includes Wall Street

Coronavirus Victims

Coronavirus Victims Now Includes Wall Street

Coronavirus victims now include your company 401k plan participants. The fear of the unknown has hit Wall Street, creating millions of new coronavirus victims – by way of reducing 401k plan balances.  Coronavirus victims now include all equity investors.  Market uncertainties around the economic and social impact of coronavirus victims is wreaking havoc on stocks. The Dow Jones Industrial Average lost 12% and the S&P 500 lost 11% last week — the worst weekly decline for stocks since the 2008 financial crisis. Other stock markets around the world followed suit.

Your participants’ retirement accounts aren’t immune to worries about coronavirus. Many are likely concerned about the losses they may be seeing in their retirement plan account balances due to the stock market’s volatility. For many 401k plan participants, especially younger generations, the market declines are likely the worst they have ever seen. That becomes an understandable cause for concern, but it’s important to convey to retirement plan participants not to panic. While the near-term impacts of coronavirus on business and the economy may be severe, the longer-term impacts are less likely to linger. The markets have experienced rapid declines due to crisis situations before, and those same markets have typically rebounded over time.  It is too early to accurately describe the true financial impact coronavirus victims will experience within their retirement portfolios. Still, at a time like this, pulling out of equity investments is likely not the best decision for the majority of the plan participant population.

Experts and pundits alike are dispensing advice to help retirement savers deal with the shock as stocks continue their path of volatility.  For example, CNBC’s Jim Cramer is advising savers — particularly younger people — that the downtrend is a strong buying opportunity, particularly for 401(k) investors. “‘If you’re in a 401(k), I know no one wants to hear this, but I think you have to buy. Buy some,’” Cramer said.” The Wall Street pundit himself plans to invest money into his own 401(k) in this down market. Tried-and-true investing strategies, such as dollar cost averaging, where savers invest the same amount of money into the market at regular intervals, can be a level-headed approach in times of volatility such as these. By doing so, retirement savers can adhere to another old investing truism: “Buy low, sell high.” Cramer is following these exact strategies, which may provide a vote of confidence for retirement investors to follow suit.

Investors who are uncomfortable with the current market volatility, or for those nearing retirement, it may be appropriate to adjust the amount of risk exposure in their portfolios. Older investors, such as Baby Boomers who are already retired, or for those who are closing in on retirement, have less time than younger investors for their portfolios to recover. So, if these folks are heavily invested in stocks, it may be prudent to make the move to a more conservative investment mix which includes a heavier allocation to bonds, for example. Research has shown that many Baby Boomers have investment allocations which are riskier than they should be.

If you’re getting a barrage of questions from participants about the impact of coronavirus and market volatility on their portfolios, here are a few tips to help them, and you, get through this tough time:

  • Most importantly — again, don’t panic or do anything rash like selling off all of your investments and moving to cash. Doing so could cause plan participants to miss out on gains when stocks move upward again, as they have performed historically.
  • It is impossible to time the markets. While we can’t control the markets, we can control our emotions, so it’s important to stay the course and minimize risk in a logical manner when it makes sense.
  • Talk to a financial advisor. If your plan partners with an advisor, encourage participants to schedule a meeting to talk about their concerns regarding their investments and the market, and review their portfolio to make sure it’s still allocated in a way that reflects how much time they have until they retire and keeps them track to achieve their long-term financial goals.
  • Stay logged out of retirement accounts, and attempt to tune out any sensationalist reports about the market or steep drops in stock indexes.

It’s important to communicate with your participants and keep them in the know all the time, but especially during times of crisis. We don’t yet know how long or how far coronavirus will spread or how severe its impact on the stock markets and the economy will be, but we do know with absolute certainty that the greater your efforts to communicate and keep participants informed, the greater the likelihood that they will keep calm when it comes to their retirement investments. They say an ounce of prevention is worth a pound of cure. Keeping a healthy outlook during this time should reduce the number or financial coronavirus victims when it comes to being prepared for retirement. You can help.

Steff Chalk

Steff Chalk

Managing Editor at 401kTV
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.
Steff Chalk
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