Coronavirus and Retirement: Mistakes to Avoid with Your 401(k)
For anyone’s who’s used to viewing their 401(k) account balance move up, the market’s ongoing decline and continued instability might be startling—if not downright alarming. However, one should not push themselves into doing something out of fear because it might only hurt their retirement plans.
According to Shon Anderson, a certified financial planner, the pandemic is undoubtedly stirring up a prime opportunity for wrong decisions related to 401(k) to be made. Sadly, not everybody will be able to dodge them, especially if their job or salary has been affected.
Due to the coronavirus pandemic, more than 16 million specialists have lost their jobs. Since it is still unsure when the strong monetary balance will return or when the stock market will recover, we’ve written down a few things to avoid doing during this crisis.
Withdrawals are a big no-no
Under the newly-passed legislation to facilitate the economic impact of the coronavirus emergency, 401(k) plan members who are under 59 ½ years of age are allowed to withdraw up to $100,000 without the 10% early withdrawal penalty.
However, it is advised by various financial advisors to use this option as a last resort, even if you are dealing with financial distress. Anderson shared that withdrawals from 401(k) funds must be avoided at all costs unless it is extremely necessary to do so.
Cashing out isn’t a good idea
There are a few things that can occur if you sell your investments and move the money to a cash account regardless of whether they are individual stocks or a target-date fund. First of all, you will be selling your stock at a relatively low cost. Furthermore, you may pass up future gains.
Even though it is difficult to foresee what the condition of the stock market will be in the future, research shows that passing up the best performing days of the market, regardless of the bad days, can hurt your long-term returns.
Do not stop contributing!
While it must be taken into account that your employer may stop its contributions to your account due to its budgetary concerns, advisors have recommended the plan holders to proceed as usual.
While putting money into stocks that are dropping every day seems nonsensical, the same logic applies to not going for cash. You won’t know when to buy back the stock and would probably end up buying the stock at a higher price. That means you might miss out on potential gains during the period you cashed-out your stocks.
More in Pocket Change
Mistakes You Must Avoid While Building a Financial Model For Your Startup
One of the most critical factors behind a startup’s success is its financial stability. And a robust money model can ensure...September 25, 2020
Biggest Real Estate Industry Myths, Debunked! Plus, How to Start a Career in this Lucrative Field
Not many fresh graduates would consider real estate as their first career choice since this industry was branded as unstructured and...September 24, 2020
Thinking of a Career Change At the Time of the Pandemic? Here’s What You Need to Know
There may be no better time to think of a career change than now. After all, the uncertainty brought about by...September 24, 2020
Effective Tips On How to Change Careers During The Pandemic
Coronavirus has impacted the lives of everyone in this world. No-one could have imagined in 2019 that the major parts of...September 21, 2020
Thinking of Pursuing a Career in Agriculture? Take a Look at These Tips First
Competition in the employment sector has always been fierce, and things have only worsened because of the pandemic. Getting jobs has...September 18, 2020
The Most Secret Advice That Can Change Your Career Forever
Have you ever wondered what makes the most successful people prosperous? Is it the loads of money they make? Is it...September 17, 2020
This Advice From Oprah Winfrey Will Change Your Career & Life
Life can often become burdensome, and when it starts to get to you, you may feel like giving up. But no...September 17, 2020
Seven Mortgage Tips For Smart Borrowers With Bad Credit
Are you seeking advice to refinance your mortgage? Refinancing with bad credit is no more a matter of concern. With significant...August 31, 2020
Career At A Dead-End? Here Are 6 Expert Tips To Help You Relaunch Your Career
If you have decided to leave your current job behind with the hope of doing something that matters more, the first...August 30, 2020