During these times of uncertainty, it has become increasingly hard for most people to save money for retirement and for the future. Some people may have a family to take care of. Others are just simply protecting their 401K. A recent survey suggested that one in three Americans are worried about losing their life savings amid the pandemic. Despite all that is going on, we can still protect our finances during these uncertain times. Here are five ways we can still save money for retirement and manage our 401K plans during COVID-19.
Establish an Emergency Fund
Now more than ever, it is vital that you have some sort of emergency fund set up. An emergency fund is an essential savings account where you can set aside money for serious emergencies, like medical-related issues. To start one, you must create a budget to funnel some money to savings every month. Most Americans automatically set-up contributions from their checks to their 401(k). Online apps like Chime are great in helping you see how much you're spending and saving each month. Aim to save enough money to cover three to six months of your living costs.
Review your Account
This is important when you save money for retirement. If you already have a savings account stashed up, now is a good time to review it. Make sure you have enough money to cover six to 12 months of living expenses. If you still have the means, don't stop contributing to your 401(k) assets. Some experts are now saying that Americans should not need to panic about their retirement savings, even during this pandemic. The market is starting to rebound after sliding during the early part of the current crisis.
Avoid Making Impulsive Decisions
With the economy being so shaky now, now is not the time to be making impulsive decisions like early withdrawals about your finances. Your balance could still increase as the market eventually recovers. If you are near retirement and able to do so, you should continue contributing to your 401(k) plan. People with steady jobs should be at least contributing up to their company's matching amount and max out if they can. If you are between the ages of 20 and 50 and planning to retire in 15+ years, moving funds away from your 401(k) isn't necessary.
Have a Balanced Portfolio in your Plan
Another thing worth bringing up is to make sure that your retirement plan has a balanced portfolio. This means that you will be spreading your money across different investments to lower your risk. You will also have access to other assets that could outperform stocks at times. A diverse 401(k) plan that invests in stocks, bonds, real estate, and other investments will be able to hold up better in the financial downturns than the overall market.
Consider the CARES Act
If you seriously need to tap into your 401(k) plan, why not consider this option in order to save money for retirement? The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides relief for those impacted by the pandemic as well as two provisions giving plan participants the option to access their funds. However, you could go this route only if it is necessary and you have no other options.
Many people are concerned about their retirement plans and whether they have enough saved during these difficult times. But there is no need to worry your head about your savings. A 401(k) plan is designed for long-term savings and doesn't require day-to-day trading. Ultimately, the best thing to do is to continue to contribute to your retirement plan, establish an emergency fund, and ride the ups and downs of the current financial market.