March 2020 represented a period of great upheaval for people everywhere. With COVID-19 restrictions going into effect and initial efforts to flatten the curve turning life on its head, the stock market took its fair share of hits during that time. Market volatility should always be considered when you take a look at your 401K and retirement portfolio as a whole. How well or how poorly the stock market performs will determine how well your 401K is currently doing and help you project its future performance.
How Did the March 2020 Crash Affect My 401K?
In addition to cancelling the college basketball tournament and delaying the start of the MLB season, the COVID-19 pandemic brought with it a slew of economic consequences that directly affected your short and long-term financial goals. Legacy planning during a global pandemic has not been easy, as countless people saw their retirement nest egg shrink, and they didn't have a plan in place to help counter that increased volatility. While you may not have a clear idea of what form market volatility can take during the life of your 401K, you can take some steps to begin to protect yourself against that volatility.
How to Protect Against Future Market Volatility
While 2020 proved to be a roller coaster for the stock market, with highs and lows tied directly to the virus's policies, the current state of the market has been overall positive. However, since we are not out of the woods yet, there is still a chance that the market can face uncertainty and chaos. With the help of an experienced 401K planner, you can take your financial future into your hands and focus on making it more resilient to volatility.
Take Stock of the Damage
You cannot begin to formulate a plan towards recovery without first understanding where your 401K presently sits. Log into your 401K, inspect the damage, see what performed well, and assess the areas that need improvement. Only by having a thorough understanding of how your 401K performed can you address its long-term future.
Inspect Your Investments, and Diversify If Needed
The investments you have selected for your 401K determine their overall value; it's the main reason why market volatility can tank your bottom line. However, you have the option to change up where the investments are made within your 401K. You can adjust your strategy and focus on different areas that may bring you a better overall return. You can adjust for risk and strive for more stability as you see fit.
Don't Neglect Your Contributions
The last area that you can adjust to help your 401K focuses on your contributions. Generally speaking, if you are more than five years away from retirement and have been happy with how your 401K has performed, then making any drastic changes to your contribution strategy can do more harm than good. If you plan on retiring in the immediate future, then your strategy is more up in the air. You'll need to assess your immediate needs and determine if you can benefit from shifting some funds to a cash account. From there, you can use that to handle some of your retirement expenses before you start dipping into your 401K, giving it a little time to recover and start performing better.
It's The Perfect Time to (Not) Panic
No matter how much your 401K has dipped throughout the pandemic, you should not panic into making a rash decision. Taking a measured approach and having the help of the seasoned professionals of Total Resource Financial by your side can help you recover and get your retirement plan back on track. The pandemic has been a turbulent time for many people, but you should not have to worry about how it has affected your retirement plans. Contact our team today to schedule a meeting with one of our advisors!