Emotions and retirement savings don’t mix very well. We are hard-wired to flee from current danger, giving little weight to the future. Before you take any significant and potentially irreversible actions regarding your retirement savings, you should pause, and consider the following:

Evaluate your cash needs

Retirement investing is a long-term exercise. You accumulate assets over a roughly 45-year working career with the hope of spending it over 20 or 30 years in retirement. Throughout this multi-decade period, you should expect numerous stock market corrections and job changes. The key is a steady savings and investing strategy.

After a market decline like this one, the only assets you should be considering moving to cash are assets you absolutely need within the next two years. If your time horizon is longer than two years, you have assets outside your plan you can use, or you have access to a short-term credit facility, like a home equity line of credit, the odds are very good that waiting to sell will put you further ahead than selling now.

It’s also worth noting that in the 32 years data have been collected, March was the third-highest month on record for insider buying, according to the Washington Service, which tracks this activity. In the month that just ended, more than 2,800 executives and directors of public companies purchased more than $1.19 billion of their own company’s stock. Do you really want to be selling when the people with deepest understanding of the value of company stock are feverishly buying?


For most long-term investors, market sell-offs like this one offer an excellent opportunity to rebalance your portfolio. Rebalancing is the simple act of buying more of what went down (stocks) by selling what has been outperforming (bonds). In doing so, you bring your total portfolio back into its preferred long-term allocation between stocks and bonds.

Take care with CARES Act

On March 27, President Donald Trump signed the CARES Act into law. This law clears the way for millions of Americans affected by the COVID-19 outbreak to withdraw as much as $100,000 from their 401(k) account, free from the normal 10% early withdrawal penalty, and allows you to stretch the normal income taxes owed over a three-year period. The law also increases the maximum allowed loan amount from $50,000 to $100,000. Thousands are likely to take advantage of the short-term window to withdraw money from their retirement accounts.

Recognizing some may have no other choice, understand pulling this trigger could be catastrophic to your financial security at retirement. Think hard about other sources of short-term funds. What you withdraw not only reduces your retirement balance today, but also eliminates the compound earnings these dollars will generate. For example, $100,000 withdrawn today would also cost a 45-year-old more than $286,000 in compound earnings by the time she turned 65, assuming a 7% average annual rate of return.

We live in a time of great uncertainty. Rise above your emotions and consider the long-term consequences of any action you take in the next few months. Your 65-year old self will thank you.

Michael J. Francis, is president and chief investment officer of Francis Investment Counsel LLC, a registered investment adviser with offices in Minneapolis and Brookfield, Wis. Reach him at michael.francis@francisinvco.com.