Educate your employees on the importance of saving for retirement

There’s no doubt that events so far this year have been an ongoing lesson in resiliency. It often feels as if nearly everything – from the way we work and communicate to how we spend our down time and even our money – has changed in the wake of COVID-19. The pandemic’s economic fallout in particular has touched millions of Americans, and it’s affecting the way many save for retirement.

In fact, the one-two combination of a global pandemic and economic recession, not to mention the upheaval in our lives that has followed, is a significant enough experience to permanently reshape the way we think about and deal with money. But whatever the context, a mistake you make today with your 401(k) can hurt you well into the future. With that in mind, here are three prudent retirement saving practices to keep up throughout the COVID-19 crisis and beyond.

First, continue your contributions

You’re saving in your 401(k) account for the long term, for needs you will have in a retirement that is perhaps far down the road and that hopefully will span many years. How the stock market performs in the next month or even the next year doesn’t matter so much when you’re measuring in decades. But the contributions you pause – because stock prices are bouncing up and down or because you fear that the economy is dragging – surely will. Stopping or reducing your contributions not only means fewer dollars in your nest egg, it means passing on the growth those dollars may earn over time. On a related note, don’t use the fact that your employer may have suspended its match as an excuse to stop withholding dollars of your own.

Second, avoid taking funds from your 401(k) account unless you absolutely must

Times are tough for many right now, maybe especially from a financial perspective. In response, the government passed the CARES Act to offer some aid. Normally, taking a 401(k) withdrawal before 59½ comes with a 10% penalty. Now, if you’ve been negatively affected by COVID-19, you can take up to $100,000 from your account penalty-free. Yes, it’s your money, but tap your retirement account as a last resort. Exhaust all other options first, like cutting out what spending you can, utilizing other coronavirus relief benefits, and seeking forbearance from lenders or flexibility from service providers. Again, you forego potential growth on any money you withdraw, so the eventual cost to you may be more than just the amount you remove now.

Third, set your mix of stocks and bonds based on your goals

Let those goals, not market volatility or economic uncertainty, guide your investment decisions. Circumstances (a change in employment, marriage, kids, your risk tolerance isn’t what you thought it was) may require you to reevaluate, but don’t panic sell your investments and try to wait out the pandemic sitting in cash. For starters, doing so locks in any losses you’ve seen on paper. Plus, if you still want to meet your financial goals, you will at some point have to decide when it’s safe to buy back into stocks. And unless you’re right twice – odds are you won’t be – you may miss out on future gains. It’s hard to see past the pandemic and its continued effects throughout our lives; it’s everywhere and touches almost everything. But the fewer mistakes you make with your 401(k) in reaction to it, the more secure you’ll be in the retirement you envision.

Review our risk/return portfolio charts.