Coronavirus and retirement: Experts' 401(k) tips

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As the White House begins to think about taking steps to reopen the U.S. economy, many Americans are still in the throes of financial turmoil resulting from shelter-in-place measures that have shut down large swaths of businesses.

Contributing to challenges is the fact that markets have been extremely volatile. This week was one of the best for stocks in decades, but the Dow Jones Industrial Average is still down more than 16 percent so far this year, while the S&P has lost more than 13 percent.

Given the uncertainty that lies ahead in the fight against the global coronavirus pandemic, many investors are worried about their 401(k) accounts.

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Here are some tips from experts regarding these retirement plans:

What to do if your employer suspends matches?

Since many businesses across the U.S. are shut down under guidelines from governments, some have decided to suspend or reduce their matching policy in an effort to cut costs.

But even if you find yourself in this situation, experts have told FOX Business that it is advisable for most people to keep their investments where they are especially if they have a diversified portfolio.

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“As long as you can do it, you should do it,” Credit Karma’s chief people officer, Colleen McCreary, explained. “Traditionally, 401(k)s generally have some really good investment options that you wouldn’t be able to do on your own.”

Most accounts do allow people to alter the amount they are setting aside for the account at any point in time. So reducing a contribution could be an option for someone who needs the extra cash in the near term, McCreary said.

Stay the course or change your allocations?

“First, don’t be a masochist and look at your 401(k) right now,” Greg McBride, chief financial analyst at Bankrate.com, told FOX Business. “Investors need to maintain their long-term perspective. It’s extremely jarring but the situation that prompted this is temporary. Don’t let any short-term temporary situation affect your long-term financial security.”

Having a diversified portfolio generally means downturns and losses have been taken into account and investors should not be making many adjustments or worrying.

And the good news? For those still working who have a 401(k) account, you are automatically investing every pay period and getting better prices than you were one month ago, McBride pointed out.

Withdrawals?

A provision in the new multitrillion-dollar stimulus legislation relaxes rules on withdrawing money from 401(k) accounts, allowing people to take up to $100,000 from that retirement stash without being subject to the 10 percent penalty – so long as the funds are used for coronavirus-related financial needs. Individuals will, however, have to pay income taxes on the money.

An acceptable use of the funds, for example, would be for a furloughed worker to put it toward his or her mortgage payments.

Typically, if an individual drew on these funds before the age of 59.5 he or she would be subject to the 10 percent penalty.

Experts, however, are cautioning against using this option if possible. Jeff Schneble, CEO of Human Interest, said it could eventually compromise the ability for people to retire down the line – especially considering people would essentially be selling at a time when the market is near a low point in valuation.

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It is estimated that about 55 million Americans had 401(k) accounts as of 2016. The average account balance among people in their 60s, who had worked for more than 30 years, was more than $287,000, according to the Investment Company Institute.

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