Invest Retirement

HerMoney Podcast Episode 206: How Your Portfolio Can Weather The Coronavirus Storm, With Fidelity’s Jeanne Thompson 

Kathryn Tuggle  |  March 25, 2020

What should we do with our retirement contributions right now, and what do we do if we’re in need of cash? Jean and Jeanne dive into all your most pressing portfolio questions.

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.  

This podcast is proudly supported by Fidelity Investments. At Fidelity, we believe planning for retirement can help you feel better about where you stand today—and more prepared for what comes tomorrow. Learn more at Fidelity.com/HerMoney. Fidelity Brokerage Services LLC Member NYSE, SIPC.

Editor’s note: We maintain a strict editorial policy and a judgment-free zone for our community, and we also strive to remain transparent in everything we do. Posts may contain references and links to products from our partners. Learn more about how we make money.

Transcript

Jean Chatzky: (00:01)
HerMoney is brought to you by Fidelity Investments. Fidelity is committed to helping clients through any market conditions with financial planning and advice when you need it most. Learn more at Fidelity.com . HerMoney comes to you through PRX. Hi everybody, it’s Jean Chatzky. Thanks so much for joining me today on HerMoney. What a year this month has been. Yeah, it feels like it’s been a whole year in the span of a week. I mean really starting on March 9th we’ve 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 knew in our guts that, COVID-19 was officially a pandemic. The market volatility that we have seen the last few days has left many, many of us on edge and understandably. According to a new survey from our sponsor, Fidelity, 70% of people are either somewhat concerned or very concerned about how the market is impacting their retirement savings. But there is some good news, and I definitely want to get to the 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 401k accounts since the beginning of the year. That is huge when you consider how many people have their 401ks with Fidelity. I think it’s great because 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. I also wanted to share a very interesting study with you about what happened when people did cash out, that Fidelity looked at people who moved completely out of stocks during the 2008 financial crisis and those people who stayed invested. And what they found was that in 2008, the investors who elected to pull out of stocks but eventually got back into the market, they had an average account balance when they pulled out of stocks of $89,000. Now you fast forward to the fourth quarter of 2019, these same investors had average account balances of $270,000. 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 $360,000. In other words, $80,000 more. So, yup. I know the headlines are not good. I know we’re worried about what’s to come. I know you’ve got questions. We’re going to try to answer some of them and I am so thrilled today to be joined by Jeanne Thompson, senior vice president of Fidelity workplace consulting. You know, Jeanne, she’s been on the show before and in her role she works with employers around the country to deliver financial wellness and wellbeing programs to their employees. Jeanne, welcome. We need some wellbeing right about now.

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Jeanne Thompson: (03:59)
We sure do Jean. It’s definitely been a challenging and trying couple of weeks. That’s for sure.

Jean Chatzky: (04:06)
I know you all spend a lot of time on the phone calls that you get from customers in work-based and other plans. What are you hearing? What are they saying to you? What are they asking?

Jeanne Thompson: (04:20)
There’s an underlying theme that people are just very concerned,, especially younger people who weren’t in the workforce during 2008 and 2009. But they’re really asking everything from, what should I do personally with my financial plan to, should I skip my IRA contributions? Should I continue to contribute to my 401k? Is the coronavirus causing the market drop and how low can it go? And even are we in a recession? It runs the gamut of everything that you might imagine and everything that you’re probably thinking out there yourself.

Jean Chatzky: (04:53)
All right, let’s try to answer some of those questions. Okay.

Jeanne Thompson: (04:57)
Okay. Sounds good. I’ll answer what I can. Some of them don’t have clear answers.

Jean Chatzky: (05:00)
I know. I know, exactly. Some of them are unanswerable because we don’t have a crystal ball and we have to rely on history. We have to rely on what has been the best case in the past. But let’s tee them up and let’s try to handle as many of them as we can. When it comes to contributing to retirement right now, my husband was telling me a story. He started work at a magazine in the early eighties and they got their 401k in 1987. And he put money in it, put money in it, put money in it, and then October, 1987 came around. He didn’t contribute to a 401k for another five years. So people who are thinking about retirement contributions, what’s the best thing to do right now? Do we soft pedal them.

Jeanne Thompson: (05:54)
So, you know, this is sort of an unprecedented time. And I think it really depends on someone’s financial situation. In general, the answer’s no. Continue to contribute. You know, especially if you’re getting that company match. You don’t want to leave that free money on the table. But it is possible people are in dire straits. Their spouse or partner’s being laid off. They’re being furloughed. You know, there’s a lot of extenuating circumstances. But just like your husband, we don’t want people to get out of the market and miss out on that upswing in the market which historically has come back and generally, after a bear market, has a longer bull run, meaning that if they’re continued to invest now, it’s almost like buying things on sale. And we call that dollar cost averaging. So if you continue to contribute now that money can grow exponentially, potentially over time. But again, we want to be sensitive to the very vastly different situations that people may be in. But I would say for the majority of people whose financial situation, apart from watching the market, they’re still able to make all their payments, they should continue to contribute cause it could pay off in the long run.

Jean Chatzky: (07:08)
Well, what if they’re not. I mean, in terms of degrees of bad options, not contributing is not as bad as taking a loan. Right? And taking a loan is not as bad as withdrawing. So can you lay that out?

Jeanne Thompson: (07:26)
So when you’re thinking about your options in terms of, should you tap into your retirement plan, the last option is a hardship withdrawal. With a hardship withdrawal, the government will hold a 10% penalty and 20% tax withholding. So if you needed to take out $10,000, you wouldn’t actually get $10,000. So that’s probably your last option. The next would be you could take a 401k loan. If you took a loan, you actually get to pay that back and you’re paying yourself back the interest. So if you did need the money, we would suggest taking a loan overtaking a hardship withdrawal. With a loan, you then also have to repay those contributions so your paycheck would be reduced by the amount of that loan repayment. And then the last option would be to stop contributing or reducing your contributions. If at all possible, you want to make sure that you take advantage of that company matching contribution because that is part of your overall compensation package. And by not saving to get that company match, you’re leaving money on the table.

Jean Chatzky: (08:29)
In terms of the different pools of money that we have right now, a lot of people have money in Roths as well as in traditional IRAs or 401ks. It’s easier to get at that money. I mean is that something that we should be keeping in mind at times like this?

Jeanne Thompson: (08:47)
You can. I would also say it depends on your age and what other options are available to you. I mean retirement, it does seem like a big chunk of money and you can look at, you know, your IRA or your 401k and think to tap that first. I mean there could be potentially other options you could tap into a home equity line. You could also look to consolidate a lot of your debt, maybe get a zero-interest credit card. So there are other options. I would say a lot of it depends on how close you are to retirement. If you’re approaching retirement, you may not want to tap into that because where the market is down, if you do withdraw, you’re essentially locking in those losses and it’s going to be very hard to replace it. Whereas if you tap into other things, you know, interest rates are very low. If you tap into your home equity, you know, people are always moving around. They’re changing jobs or getting married, divorced, they’re downsizing. So a house, tapping into that equity line might be an option to consider versus locking in the losses in the market.

Jean Chatzky: (09:46)
When we look at the investments in our portfolios, if we’re not in a target date retirement fund, if we set our investment mix ourselves, maybe we had every intention of rebalancing, we didn’t rebalance. We’ve got more in stocks than we perhaps thought we had or would like to have. What’s the best way of looking at our investment mixes at this point? And how do we do that? We know we’ve got a third of our listeners are millennials. A third of our listeners are gen X. A third of our listeners are baby boomers. So can you answer the question for all of us? Yeah.

Jeanne Thompson: (10:25)
You know, if you’re young, you know, you’re a millennial or starting to see some gen Z coming into the workforce, you have got time on your side. And even if you were in a target date fund or you’re investing on your own, you likely were very heavily invested in equities. And you know, at this point I wouldn’t make a move. You’ve got potentially 25, 30, 35 years to retirement. And in that time, the opportunity for growth is great. You know, if you’re in mid career, you know you’re a gen Xer, even if you’re 45, say in your early forties, you potentially still at 40 or 45 have 20 years or so till retirement. And so you may not want to make a move either. If you’re a boomer or even an older gen Xer you know, your early fifties, even into your late fifties. The hope is, and what we find in looking at our data, is that, as people age and their balances grow, they tend to be much more engaged. And so hopefully they were onto a hack before this recent volatility that we’re seeing in the market. And so, it is a good time to look at what you’re doing. But again, we just would caution against locking in your losses. And so making sure that, if you’re 50, you may not retire for another 15 years. If you’re 65, you could start to think about what are the other sources of guaranteed income. It’s very hard to predict when the will go down. You could lock it in today and then it goes up and you’ve missed it. It’s very hard to time the market. And so, I would start to look at, are there other sources of guaranteed income? Could you potentially work a little bit longer so that you’re not solidifying the situation that exists today.

Jean Chatzky: (12:12)
For people who do think that they want to make some changes, they think they are overexposed. I mean you talked a little bit about dollar cost averaging. When we do rebalancing at a time like this, do we do it slowly?

Jeanne Thompson: (12:27)
I would recommend slowly because you never know what the market’s going to do every day. And if you have sort of a knee jerk reaction and depending on what your goals are, what your time horizon is, what your risk tolerance is, you don’t necessarily want to make a decision today that you potentially regret tomorrow. And so doing it slowly, over weeks or over months, is probably taking a less risk averse approach to it so that you’re not having this knee jerk reaction and then regretting it. It can be hard to stomach but you do want to make sure that you can sleep at night. I mean there’s enough I think in this situation, unlike 2008, there’s enough else to worry about in terms of health and trying to work at home and family and kids that you do want to make sure you think through your decision.

Jean Chatzky: (13:17)
You’re dancing around the topic of stress, which I know you’ve done a ton of research on and I think we all need to release a little bit of financial pressure, but before I do that, I just want to remind everyone that HerMoney is supported by Fidelity Investments. And for more than 70 years, investors have relied on Fidelity Investments to help plan for their financial futures. As always, when the unexpected happens, Fidelity is there to help you work through it with financial planning and advice for what you need today and tomorrow, helping to make it all clear. To see how Fidelity can help you and your family on the path forward, visit Fidelity.com. I’m talking to Jeanne Thompson, Senior Vice President of Fidelity Workplace Consulting. Let’s talk about financial stress. I mean, as if we weren’t under enough financial stress, we had to have this pandemic take hold. You’ve done some research that I thought was really, really interesting about who’s under stress and how to get rid of it. And the research is tactical in a way that I haven’t seen a lot of research be tactical. So let’s talk about it.

Jeanne Thompson: (14:32)
Yeah, I mean we did, what we found was that, obviously working for Fidelity, we really focused on the finances, but we’ve found that financial stress kind of bleeds over into other areas of your life. It can impact your health, it can impact your work situation and it can impact just your general life and 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. You know, you’ve got the worries of the financial markets. You’re now maybe suddenly working at home with your children. You know, many of the people I work with have young children and they’re sitting on their laps, along with the dog barking. And so it’s been very challenging from that perspective. And then you’re also worried about your aging parents. And so it’s really bringing all of this together. You know, some of the research that we’ve done with the Stanford Center on Longevity, really highlights too that these unexpected things that happen in life, are the things that really have a negative impact on our stress levels, on our sleeping, on our eating, on our exercising. I think the thing that’s so unsettling about all of this is that you just don’t know what’s going to happen next. Two weeks ago or three weeks ago, no one ever anticipated this. And even now, we’re sort of waiting for the news to come out of when is it going to end? And nobody can really answer that. When are the markets going to be stable, but we don’t know. And so I think what we have to do is, you know, there’s always this notion of living in the present and living in the moment. And this situation is forcing us to do that. I think you have to have an eye on the future, but I think it’s a good time to keep those routines, spend time with family, make a phone call to friends, cook all those recipes that you never cooked. Clean out the basement. Clean out your garage. I mean, I think it’s an opportunity to do a lot of things that we never really want to do, but now we sort of 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. And then when the markets come back, we can get back on track with our financial lives.

Jean Chatzky: (16:38)
Yeah. I think, I mean what I was struck with looking at this research, and I’ve looked at this particular study that you did with the Stanford Center on Longevity in a lot of detail. What’s interesting to me is that we have stressful situations all the time, right? We have an average of four major stressful situations every single year. Now, granted, they’re not like this, right? They are not like this. But the things that help are exercise, on a regular basis. I mean controlling what you can control. And for me, I went down and hit the treadmill today before I talked to you. I did not want to go hit the treadmill. I really like, I was on the exercise bike yesterday. I’m getting a little sick of my basement. Maybe, I’ll go outside tomorrow if it’s not raining, but I’m making myself move every single day. Cause somewhere, somehow for me, that ability to sweat, just releases some of that pressure. And I’m also trying to, I mean boy oh boy, I have a big desire to dip into package of Mallomars that’s sitting in the pantry. But I’m trying to eat a little healthier cause I think that’s gonna make me feel better too.

Jeanne Thompson: (17:59)
Yeah, I agree. I mean sort of the diet, exercise, and the other thing is sleep, right? You know, is making sure that you’re getting your sleep. I did not want to get up this morning and it was raining and I got up at 5:30 to go on the treadmill myself. I’m not quite as probably an avid runner is you, but just getting moving was huge. My weakness is those chocolate covered eggs that are out in all the stores now. But I do think having healthy food as much as we can. I know the supermarkets are, in some cases, the shelves are empty. But taking that time to connect with your family or call a friend while you’re eating if you’re living alone. But to make those social connections, I think are very important, as well as the exercise release. I mean we found one of the big anecdotes to stress was friends. That was the one thing that generally didn’t stress people out. And I think the exercise, the sleep, eating well, you know, those are things, even if you don’t have the treadmill and you can get outside for a walk or a short run, that can make a huge difference.

Jean Chatzky: (19:07)
Where do you think talking about the financial issues that you’re facing fits in? I mean we live in this world where we don’t like to talk about money in good times. Do you think talking about it with people in our lives would be helpful now?

Jeanne Thompson: (19:23)
Yea, you know I think it would because in some sense a lot of us are all in the same boat. Most people have a 401k or retirement and everyone’s watching it, right? And we’re seeing what’s happening. And you know, that is something where if you’re feeling something or you’re feeling stress about it, you’re probably not alone. And that doesn’t mean you have to sit there and talk about how much you have in your 401k or your IRA. It doesn’t mean you have to talk about how much you bought your house for or how much income you’re making. But it certainly could be a very good time to talk about, how are you cutting back? You could talk about, hey, I didn’t really have much of an emergency fund. Do you? What are the steps that you’re taking? It’s almost like, you know, sharing, sharing recipes or exercise tips or motivational things. If there’s other ways to talk about money and open that conversation, without actually having to reveal stuff that maybe you don’t want to reveal, but it’s a way to just understand, do other people have better tips and strategies for dealing with money or getting that budget down, getting that emergency fund set up. And you may take one or two nuggets from each person and then can formulate your own plan and something that works for you. And if you’re not someone that wants to sit there with these massive detailed spreadsheets, that’s probably not a longterm strategy that’s going to work if you don’t like spreadsheets. But taking a look at your credit statement or your bank statement and looking, where is my money going? Right? I mean that’s something that I do to understand where am I spending it and is it in the places that align with my objectives and my goals.

Jean Chatzky: (20:58)
And if you’re not sure, how do you figure that out at this point?

Jeanne Thompson: (21:03)
You know, what, ask for help. Now is a great time, and as we talked about earlier, we have a lot of people calling, we have tons of people going onto our website. You know, there’s all sorts of resources out there and people wanting to help you navigate the situation. It’s definitely unprecedented and there’s no reason to go it alone if you’re at all feeling nervous or have questions.

Jean Chatzky: (21:25)
Jeanne, thank you so much for making time to be with us. Always a pleasure.

Jeanne Thompson: (21:30)
Jean, as always, my pleasure and stay well.

Jean Chatzky: (21:32)
You stay well as well and I’ll be right back with Kathryn and your mailbag.

Jean Chatzky: (21:39)
And we are back with your mailbag and HerMoney.com’s Kathryn Tuggle. Hey Kathryn.

Kathryn Tuggle: (21:54)
Hello. Hello.

Jean Chatzky: (21:55)
Hello, hello from across the airwaves. I don’t like this not being with you when we tape the show.

Kathryn Tuggle: (22:01)
I know. I like to look at you and make eye contact with you.

Jean Chatzky: (22:04)
We’ll have to try to do that next time with some sort of other technology.

Kathryn Tuggle: (22:10)
For sure.

Jean Chatzky: (22:10)
I’m a little afraid of too much technology cause you know me, like trying to get my phone to do something when I am unable to do it and I don’t have a 22 year old who can help me is very, very difficult.

Kathryn Tuggle: (22:24)
Yeah. I don’t have an Alexa or anything like that that you talk into. I just, I have my phone, I have my computer and that’s enough.

Jean Chatzky: (22:31)
Yeah, we have one. We got it as a gift and all I ever do is say Alexa, play Hamilton or Alexa…. I use it just like for some music in the background. Alexa, play Billy Joel and, you know, now everybody knows my taste in music. Hamilton and Billy Joel.

Kathryn Tuggle: (22:50)
Amazing.

Jean Chatzky: (22:50)
Oh, we’ve got some letters. Let’s get to them.

Kathryn Tuggle: (22:52)
Our first note is from Cam in Columbus, Ohio. She writes, hi Jean and Kathryn. I’m a regular listener of your podcast and I love it. I just refinanced my student loans at 3.86% for a five year term. I would highly encourage others to do so since the rates are much lower now. My question is regarding student loan payments. My monthly payment is $600 a month and I can pay an additional $900 monthly. My plan is to pay off my $32,000 by the end of 2021 or early 2022. By paying $1,500 monthly towards my student loans, covering living expenses, 401k and emergency savings, I don’t have any money left to invest on my own. Do you think that the $900 additional student loan payment would be better spent buying stock in the market now that prices are down or continuing to pay my student loan at the accelerated rate. Thank you so much for all your wonderful advice and the fantastic podcast.

Jean Chatzky: (23:45)
Thank you so much for a great question. And first of all, can we just say Cam, you are a rock star. I mean look at this.

Kathryn Tuggle: (23:52)
Incredible.

Jean Chatzky: (23:52)
Incredible, all of the boxes that you are ticking off. I am just blown away. So firstly that this is just good on you. Here’s the question that I want you to parse and I think it’s the only way to answer your question. If we were to just go by the numbers, the interest rate that you’re paying on your student loan is fairly inexpensive money, right? 4% fairly inexpensive. If you invested the money in the market over the long term, is there a chance that you could beat those returns? Absolutely, absolutely. However, during these times I think there is every chance that the market is going to go down before it goes up. I’ve been listening to a lot of people talking to a lot of people, reading a lot of things, looking at what happened in 2008 where in fact the markets didn’t bottom out until March of 2009 and I want you to ask yourself, how will you feel if in a couple of years you think back and you realize, wow, my student loans could be gone right now, but they’re not because I put the money in the market and the market didn’t do anything. If you think you’ll feel bad about that decision, I would take the sure bet and I’d pay off your student loans. It sounds like you’re very young. It sounds like you’re an aggressive saver. It is quite possible that I am wrong about this and that the money that you put into stocks at this time would have been the better bet, but I think you have to weigh how your gut is going to feel about that into years. If your stocks are just sitting there. That’s the only answer I have. Kathryn, would you lead her in another direction?

Kathryn Tuggle: (25:54)
You make such a great point because so many of these decisions in finance are about what is going to help you sleep at night, right? Like what’s going to make you feel the most positive energy? This is similar to different strategies when it comes to paying down your credit card, right? Like sometimes you pay off those smaller balances first rather than the balances with the highest interest rates because you get those good feelings when you can pay down a card first. Right?

Jean Chatzky: (26:26)
Yeah, absolutely. I think that’s a really, really good analogy.

Kathryn Tuggle: (26:30)
And this is similar to that, so it’s really, I think, get your list of pros and cons. Are you the kind of person who wants to see that pay down quicker or would you prefer to have a substantive portfolio built up with the knowledge that that portfolio might tank.

Jean Chatzky: (26:47)
And realize you can split the difference?

Kathryn Tuggle: (26:50)
Exactly.

Jean Chatzky: (26:50)
If you put half the money toward paying off your student loans and half the money into investments, you could sort of hedge your bet.

Kathryn Tuggle: (26:59)
Totally. Totally. Let us know what you do.

Jean Chatzky: (27:02)
Yeah, for sure.

Kathryn Tuggle: (27:04)
Our next note is from Lynn in Maine. She writes, hi Jean. I’m 63 years old and recently retired. My money has lost 20 to 25% of its value, mostly in the past few weeks. 75% of my money is in stocks. About half my money is in tax deferred retirement accounts. I’ve got laddered CDs that’ll cover most of my expenses for the next seven years. So I’m not panicking about recent stock volatility, but because of my age I’d like to rebalance to have less in stocks. How will I recognize it’s a good time to sell some of my stocks? Should I buy bonds or more CDs with a guaranteed return? Many thanks.

Jean Chatzky: (27:40)
So let me tell you what I think Lynn, but let me just top it off with the fact that I think you need a plan to get you through the next 30 years. I think you need a written plan that shows you how much money you need to live and how much this portfolio is going to spill off in order to get you there. And I can’t really tell from the question as it’s phrased where you are. I mean, I do think that these ladder CDs that will cover your expenses for the next seven years, I’m grateful that you’ve done that and I think that’s terrific. It means that you don’t have to panic sell, you don’t have to sell at a low. What traders will tell you is you wait for a good day to sell some of these stocks, but I also think you should look at the stocks that you own and the fundamentals on the stocks that you own and ask the question about whether you would buy those stocks again today. It’s tough for me to tell. You say the money is in stocks. I can’t tell if it’s an individual stocks or if it’s in mutual funds. If you’ve got the money in funds rather than in individual stocks, I would wait for some good days and I would sell small pieces as the market hits those good days and I would do it over a very long period of time. I mean the nice thing about the seven years of money that you have in CDs is that you’ve got a long timeframe for the markets to start to come back. I would give yourself some time for the markets to start to come back. Before you even start doing this. I would let the dust settle a bit and I would make an appointment, probably a virtual appointment with a financial advisor who can look at everything that you’ve got and give you a strategy to make your money last as long as you’re going to live.

Kathryn Tuggle: (29:45)
That was going to be my question which was, is this a time that anybody should be moving their money out of stocks? You should wait for the rebound, right?

Jean Chatzky: (29:54)
It’s a tough question, right, because if you’ve got all your money in stocks and we know that there are bound to be some people who’ve got all their money tied up in stocks and they need some of that money to live, they’re going to have to sell a little bit of that, right? If you’ve got a choice, if you’ve got other funds to pull from and you are a believer in those investments, then yeah, you don’t sell right now. In fact, if you have to sell something, maybe you take some money out of fixed income because it has held up a little bit better, and so you’re not going to have the same tax issues and you’re not going to be selling at such a low state. But I also think it sounds a little random to me what she’s got going on here. It sounds almost like, and I’m doing a little bit of psychic reading of this letter, but it sounds a little bit like maybe there was a financial advisor in the picture who put her in this laddered CD portfolio at some point, but maybe there’s not now. And I think entering retirement, there really needs to be.

Kathryn Tuggle: (30:58)
Such a great point. Our last note comes to us from Rosemarie. She writes hi Jean and Kathryn. I’m 66 and still working full time because I want to, with no plan to retire anytime soon. I max out my 401k contribution every year. Should I continue to max out or reduce my contribution to secure only the company match and put my extra cash into a savings account. I currently have $375,000 in my 401k, about $40,000 in savings and about $70,000 left on my mortgage with no other outstanding debt. I love the podcast. Thank you.

Jean Chatzky: (31:32)
Thanks so much for the letter Rosemarie. I’m wondering what your cost of living is. Because we are in such uncertain times. I’d really love to see that savings account be enough to support you over a full six months. Assuming that you’re there, then I would continue to max out my 401k contribution. I think you grab all those matching dollars and you want to make sure that you’ve got enough to continue to get you through retirement at the same point that you are paying off your mortgage and taking care of the rest of your financial life. I think if you want to be adding to that savings account a little bit, even if it will cover you for six months, that’s an okay thing to do as well. As you start transitioning into retirement, you’re going to need more of your money to be in a more liquid state. When you look at your portfolio, you’re gonna want to have enough money in cash or cash like investments so that you can carry yourself through three, some people may say four or even five years, and you’ll get that from a combination of the money that you have in savings, the money that you’ll be withdrawing from your retirement accounts, but you don’t want it in a position where you have to sell investments in order to get it, and social security. And that’s the money that will carry you through your life. So just be cognizant of that. Even though you say you have no plans to retire right now, as you start to think about when you might start to have those plans to retire, that you’re going to have to shift in that direction. Does that make sense?

Kathryn Tuggle: (33:22)
It does. Absolutely. Just be flexible. Really.

Jean Chatzky: (33:26)
Be flexible. And as I was saying about the last letter, I really think that even if you don’t have a financial advisor in your life, sitting down with a financial advisor, as you think about transitioning into retirement, is money well spent.

Kathryn Tuggle: (33:43)
It’s so true because there’s so many things you can do that are good things as you head to retirement, but unless you have somebody looking at your entire picture, telling you that all of the good things that you’re doing are working together, that’s what you need.

Jean Chatzky: (33:56)
Exactly. Exactly. You want that whole picture to move cohesively. Thank you. Kathryn. If our listeners have questions during these tumultuous times or any time, how do they get to us?

Kathryn Tuggle: (34:11)
Absolutely. mailbag@hermoney.com and if you have a question that you want us to tackle in the coming weeks about the corona crisis, then you can just make that part of your subject line. Otherwise you can submit questions that are evergreen anytime.

Jean Chatzky: (34:27)
Fantastic. Thank you so much.

Kathryn Tuggle: (34:29)
Thank you.

Jean Chatzky: (34:30)
Sure. In today’s Thrive, I want to talk about connectedness. And I know that is strange timing because we’re being told to stay physically distant. But it’s also I think a really important time to hear this message. Years ago I wrote a book called The Difference that looked at why some people succeed in all types of economic climates while others don’t, or even worse, fallback, and I did a big piece of research for this book, a study of 5,000 people and found that there were about 10 factors that play into the difference. And some were financial. It really helped if you were a habitual saver. It helped if you had financial goals. But others were softer skills, softer talents and being connected or being a connector was one of them. Social capital is the asset that’s created when relationships between people change in ways that lead to action. Generally action for the good. One friend introduces you to another friend and that friend is so taken by you that she immediately thinks of you when her company is looking for somebody to hire for that next job. That is social capital at work and like stocks, like real estate, like other assets, social capital has value, only you can’t measure it in dollars and cents. It’s currencies are information, resources and sponsorship, which is when somebody puts her neck out to further your career or to lend you a hand. It can get you promotions. It can get you jumps in salary. It can get you necessary contacts for the future and it can get you satisfaction. And right now, we need to preserve our social capital by connecting online. So whether you do it with friends on the phone, whether you do it in Facebook groups, whether you do it in zoom meetings, please make sure that you don’t stop casting a wide net. Socialize as much as you can. It’s important to make time for people, even now, especially now, when you can’t reach out and touch them. Thank you so much for joining me today on HerMoney. I want to say a big thank you to Jeanne Thompson from Fidelity for joining us today and walking us through her thoughts on these trying times and what we can all do to stay calm and stay the course. If you like what you hear, I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review. We love hearing what you think. We also want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper and our show comes to you through PRX. Tune in next week, we’ll be back with another great HerMoney guest. Thanks so much for joining us and we’ll talk soon.


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