What a year this month has been… Starting on March 9th, we watched as the Dow began a series of record-setting point drops. Then on March 11th, the World Health Organization announced what many of us probably already suspected — that COVID-19 was officially a pandemic. The market volatility that we have seen the last few days has understandably left many of us on edge.
According to a new survey from Fidelity, 70% of people are either somewhat concerned or very concerned about how the market is impacting their retirement — but there is good news. Even though emotions are running high right now, people seem to be staying focused on their long-term goals. Through March 15th, 96% of Fidelity customers had not made changes to their 401(k) accounts since the beginning of the year. It can be so very tempting to try and protect your money during times of market downturn, but what we know is that when we sell out near the bottom, that is typically a mistake. Staying the course and focusing on the long haul has historically been the way to go. Fidelity did a study that compared people who moved completely out of stocks during the 2008 financial crisis and those people who stayed invested. What they found was that in 2008, the investors who elected to pull out of stocks but eventually got back into the market, had an average account balance (when they pulled out) of $89,000. Now you fast forward to the fourth quarter of 2019, those same investors had average account balances of $276,000. But then you look at the investors who stayed the course. In 2008, their average account balances were smaller. They were $79,000. But by the fourth quarter of 2019, they had accumulated an average of $360,000. In other words, $80,000 more. That’s huge — and all from just staying the course.
But right now the headlines are not good, and many of us have questions — to answer those, Jean sat down with Jeanne Thompson, Senior Vice President of Fidelity Workplace Consulting. In her role, she works with employers around the country to deliver financial wellness and wellbeing programs to their employees.
In this week’s episode, Jean and Jeanne dive into what we should do with our retirement contributions right now — do we continue to put money in, even during times of economic turmoil? What do we do if we find ourselves in dire straits due to a layoff or furlough? They also discuss what it means to take hardship withdrawals from our retirement accounts, 401(k) loans, and other options for liquidity, including tapping into a home equity line of credit, and zero interest credit cards.
The pair also discuss rebalancing and analyzing the investment mix in our portfolios right now. The “right” answer depends almost entirely on your age, and how far away you are from retirement. Jeanne breaks things down for folks in their 20s, 40s, 50s, 60s and beyond. Perhaps most importantly, she recommends rebalancing things slowly if you’re going to do it, since the market is changing day-to-day.
Jeanne also offers up important thoughts on how we can all manage our stress during these times, and how financial stress so easily bleeds over into other areas of your life. “It can impact your health, it can impact your work situation and it can impact your day-to-day interactions with your friends and family. I think the combination of the market volatility and the Coronavirus is bringing all of this to a head like we’ve never seen before,” Jeanne says. She recommends keeping everything in perspective by maintaining a long-term view, getting as much exercise as you can, keeping in touch with close friends, and seizing this moment to cook a new dish, or clean out your basement.
“I think it’s an opportunity to do a lot of things that we never really want to do. But now, we hopefully have the time to do some of that, and we’ll feel good coming out on the other end if we clean up all the other things in our life. Then when the markets come back, we can get back on track with our financial lives,” Jeanne says, adding that getting into a consistent routine with our kids and the demands of working from home can make each day seem less stressful.
Then, in Mailbag, Jean and Kathryn tackle a question about prioritizing a student loan vs. investing in the stock market. They also dive into a question from a 63-year-old woman who recently saw her account balances drop and is wondering if now is a good time to rebalance. Lastly, they hear from a listener who is wondering if she should prioritize putting money into her 401(k) or her savings account, given the recent market turmoil.
In Thrive, Jean tackles the concept of connectedness and “social capital,” which is the asset that’s created when relationships between people change in ways that lead to action — action for the good. At this moment in time, we all need to preserve our social capital by connecting online, and Jean offers tips for how to do just that.
For more information, and for articles that are being updated daily as the coronavirus situation evolves, visit Fidelity.com/volatility.