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Outside the Box

Opinion: Planning for retirement while social distancing — why you shouldn’t go it alone

How to make the right long-term investing decisions during a pandemic

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Retirement investors are nervous. I understand why. One look at our first-quarter statements shows the impact historic market declines have had on the account balances of millions of Americans. Some questions you might have right now are whether to sell out, shift your investments to more conservative options, or stop contributing to retirement all together.

To make the right choices for the long-term, it’s important to step back from short-term thinking.

I know that’s not easy. News about the pandemic and its economic impact seems all consuming, but keep in mind how far you are from your goal. Whether you’re 30 years from retirement, or it’s around the corner, your strategy will succeed or fail based on market trends over years or decades, not the last 30 or 60 days. The big three questions for a retirement plan haven’t changed: How much should I be saving? How should I invest my savings? How much can I expect to have in retirement?

Secondly, while we might all be socially distancing right now, that doesn’t mean going it alone on your finances.

This FIRE couple was down $232,000 as of April 1. Here's their plan

If you are not already familiar with the financial wellness resources at your own workplace, it’s a great time to get to know them. For example, most 401(k) plans offer some type of personalized advice that can help you look at your whole financial picture.

Read: 9 ways the coronavirus stimulus can boost your financial future

In this unprecedented environment, financial professionals might have some answers that might surprise you. For example, increasing your savings rate and sticking to your investment plan may make more sense than retreating from the market. In more than half the advice consultations we facilitated in March, participants decided to increase how much they were saving in their retirement plan.

By working with a professional or using advice tools, you may still determine you need to rebalance your portfolio. If so, consider doing it gradually. Markets are still volatile and despite the feeling that everything is heading down, it’s still just as difficult to predict which way markets are going in the short term. In March, the S&P 500 SPX, -0.52% posted a daily loss on 12 trading days, and a daily gain on the other 10. Rebalancing over time reduces the impact of bad timing.

On the heels of the recent $2 trillion coronavirus stimulus, formally known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, you may also be considering whether your retirement savings could help you meet basic expenses.

Read: Where to get health insurance if you lose your job

Protecting retirement savings is very important, but some people may need those funds for essential expenses right now. We urge people to seek professional financial guidance before turning to their retirement money so that you evaluate all alternatives and understand the long-term consequences, including missing future potential market gains and tax implications.

If it is your only option, there are also ways to reduce the downside and minimize how much you need to draw on your retirement nest egg.

Read: Employers are starting to suspend the 401(k) match

First, consider what is truly essential and how long you need this money to last. One month? Several months? Make your best estimate so you have enough to cover your needs while also working to reduce expenditures in the near term.

Next, check with your billers. Many companies are offering temporary relief for customers, including mortgage lenders and utilities. You may have the option to delay payments.

Finally, if you must take a withdrawal or loan for essential expenses, have a plan to restore your balance as things improve in the coming months and years.

The coronavirus stimulus makes it easier for people impacted by COVID-19 to access and repay their retirement savings. The legislation waives the 10% penalty on early withdrawals (up to $100,000) from IRAs and company plans in 2020. Income tax on the distribution can be paid over a three-year period and you also can replenish the funds over a three-year period and have any taxes paid refunded to you.

CARES also doubles the current company retirement plan loan limits to the lesser of $100,000 or 100% of your account balance in the plan. Loan payments don’t have to be made in 2020, giving you some time to catch up on your day-to-day financial situation. It’s important to note that both withdrawals and loans are subject to the plan rules your employer has in place. That’s one more reason to talk with your plan provider to fully understand your options.

It is a difficult and unsettling time across the country. The right moves for your financial needs today and for your retirement in the future are different for everyone, but you are not alone. Reach out to your retirement plan, explore all the tools and resources available to you, or talk one-on-one with a financial professional.

We’ll get through this together.

Catherine Golladay is president of Schwab Retirement Plan Services.

At the direction of the Plan Sponsor, or Plan Administrator, Participants may have access to advice services that can provide Participants with a retirement savings and investment strategy for their Plan account, furnished by an independent registered investment adviser (“Advisor”). The Advisor is not affiliated with or an agent of Schwab Retirement Plan Services, Inc. (SRPS); Charles Schwab & Co., Inc. (CS&Co.), a federally registered investment adviser; or their affiliates. Neither SRPS, CS&Co., nor their affiliates supervise, make recommendations with respect to, or take responsibility for monitoring the advice services provided to the Participants by the Advisor.

The term “personalized advice” refers to personal participant data such as age, salary, and Plan account balance, which will form the basis by which the Advisor will establish the Participant’s savings and investment recommendations.

The information contained herein is proprietary to Schwab Retirement Plan Services Inc. (SRPS) and is for informational purposes only. None of the information constitutes a recommendation by SRPS. The information is not intended to provide tax, legal, or investment advice; please consult with your accountant or investment adviser for how this applies to your specific situation. SRPS does not guarantee the suitability or potential value of any particular investment or information source. Certain information provided herein may be subject to change. None of the information contained herein may be copied, assigned, transferred, disclosed, or utilized without the express written approval of SRPS and its affiliates.

Schwab Retirement Plan Services, Inc. and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Schwab Retirement Plan Services, Inc. provides recordkeeping and related services with respect to retirement plans. Brokerage products and services are offered by Charles Schwab & Co., Inc. (Member SIPC,