Not dwelling on the gruesome losses on Wall Street. Not looking at your 401(k) every other minute.
The old adages grew much harder to follow in March as we watched the Dow plunge by more than 30 percent from the records set just a month ago.
The pocketbook realities of COVID-19 have hit us everywhere from our workplaces to our 401(k) plans.
One reader in West Bloomfield, Mich., emailed me confidentially: “I’m not selling, buying or checking my account. Not much I can do to change what happens now.”
We’re looking at loss all around us. Loss of savings. Loss of jobs. Loss of lives.
So, maybe, not looking at your 401(k) could be the best personal care move that you can make as we adjust to the drastically altered new normal.
‘I am not selling’
Some economists insist it doesn’t make much sense to dwell on the rapidly shrinking bottom line in retirement accounts.
“I’m not checking my balance often much. I think if you check your balance too often, it can drive you crazy,” said Charles Ballard, a Michigan State University economics professor.
Ballard said his overall balance for his retirement savings plan at MSU was down a little more than 10 percent as of March 16. Some stock indexes are down about 30 percent but his entire portfolio is not down that much because he reduced his exposure to stocks “as I found myself getting closer to retirement.”
“I am not selling. My strategy for 40 years has been to contribute every month to my 403(b), which is run by TIAA,” he said.
For many years, he was comfortable investing his entire retirement savings plan in stocks. But he put more into bonds and real estate as he moved closer to retirement age.
“But I still have a lot of stocks.”
“My stock market portfolio took a big hit in 1987, and in 2000-2001 and in 2008-2009, but each time it came back,” Ballard, 65, said. “It will come back this time, too.”
The reality is there’s only so much you can control here — and a lot that you really cannot control.
Strategies for everyone
You can talk to your credit card issuers, bank or mortgage company to see what options are out there for skipping a payment or seeing a reduction in your interest rate, if money is tight now.
You can look into a special 90-day window that allows you to pay your federal income tax bill by July 15, instead of April 15.
You can make sure to file your federal income tax return as soon as possible, if owed a refund.
The exact extent of the economic drag and job losses in the United States is difficult to estimate, according to Robert Dye, chief economist for Comerica Bank.
We’re likely to see a significant volume of layoffs, he said.
And job cuts always make people even more worried about their money, too.
“In my experience, with time comes more anger and stress,” said Melissa Joy, president of wealth adviser Pearl Planning.
And the more stressed-out you get, the more likely you may be to throw up your hands and dump stocks at the bottom of the market. Or do other things you might regret later with your money.
“Every one of us is adjusting and modifying our lives,” Joy said. “Everyone is on a different emotional-reaction journey.”
How you react will be influenced by what’s happening directly in your life, not necessarily what’s happening on Wall Street.
Is someone in your family sick? Are you still working?
You may need to consider what you’d do if you lose a paycheck.
Before selling every stock fund in your 401(k), she said, step back and consider how much cash you have on hand in a savings account or a money market account.
If you have enough to get you through three months to six months, she said, you can buy more time and wait things out.
Maybe taking a deep breath is easier said than done but it’s worth doing.
