The coronavirus pandemic has prompted concerns about health—and not just physical health. Financial health is also a major concern for many NHPR listeners.
Dozens have told NHPR through our ongoing survey that the stock market slide that began in March has taken a huge bite out of their retirement portfolios. One person wrote to lament the lost of $13,000 of retirement savings. Another wrote that they don’t eat out anymore.
Melanie Ossman of Canaan was worried that she’d be furloughed from her job, so she stopped contributing to her 401k.
“I was so nervous and I didn’t want to feel like I was just setting cash on fire in the market and exposing it to more risk. I said, ‘Well at least let me hold onto it liquid.’”
Ossman just turned 51 and was hoping to retire in her mid-sixties, but even before the pandemic struck, she wasn’t sure she could.
She says her employer has eased her fears about being furloughed. But she hasn’t yet restarted contributing to her 401k, and she wonders if she should have stopped in the first place.
“Should I have just kept on with the money that was going in with every paycheck? Should I have kept that? What did I potentially lose by stopping those contributions?”
Greg Pelletier is a wealth manager based in Nashua for Northeast Planning Associates. He says the pandemic has prompted calls from his clients.
“Some of them just want to vent. Some want a cry. Some want a hand to hold. But we’re not significantly changing any of the philosophy that we were doing to manage 98% of the portfolios,” he said.
In general, Pelletier tries to tell clients that it’s normal for the market to move up and down.
“A typical high to high or low to low in the market historically has been four and a half to five year period. We were running an 11, 10-plus year cycle of an up market. Statistically we were so overdue for a correction it wasn’t funny."
To Melanie Ossman’s question about whether it’s smart to stop contributing to a 401k right now, Pelletier says it’s impossible to give blanket advice. Everyone’s situation is different. But Pelletier says, in general, if you’ve got six months of cash reserves and a stable income, it might make sense to keep contributing to retirement funds that rise and fall with the stock market.
“If the market’s getting beat up, you’re actually buying everything on sale. All you have to do is get back to even and you’re making money,” Pelletier says.
Pelletier says there are opportunities in this current market for people who need more cash now. Refinancing a home might make sense, he says, given relatively low mortgage rates. Home Equity Lines of Credit may also be a useful tool - again, depending on your overall financial situation.
Elizabeth Salas Evans, president of Cayena Capital Management in Weare, says companies often have someone available to talk to employees about their particular 401K.
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“Who is it that you can talk to at your company that can talk to you about your plan without you having to maybe feel that intimidation of being sold something by calling a random advisor?”
Overall, whether you’re nearing retirement or already there, Evans says now is a great time to educate yourself and make or revise a plan. But whatever you do, she advises against giving into fear, which she says inhibits proper decision-making.