Don't Panic! or Panic! which advise is right?

Over the last few weeks employees at my workplace have been contacting the human resources benefits office wondering what to do with their defined contribution retirement savings programs. There is no universal answer about what to do with 401K savings, invested in mutual funds, during a fluctuating and volatile market period. Also, as employers (not financial advisors), we are often reluctant to give advice in an area where we are not considered experts.

That said, employees will look to human resources and benefits professionals as experts regarding workplace investment programs such as 401K, 403b, or 457 type accounts. Speaking without knowing the facts, or remaining silent are both mistakes.

So, here are some possible words of wisdom from a friend of mine who is a financial professional and who has a calming demeanor:

"These past few weeks have been the most volatile and I have seen in my twelve year career in financial services. And, I have been handling numerous inquiries from participants as to what should be done. My message has remained: Stay the course / Don’t Buy High and Sell Low / If a mutual fund looked good at a share price of $20, it looks great at $14!

Here are some additional points made over the course of several discussions:
1) Think “long-term” … Most people have more than a decade and a half until they access the bulk of their retirement savings. Seeing that the market runs on 6.5 year cycles, there’s going to be at least two more “bull” markets in that time … ‘you gotta be in it to win it,’ per se.

2) Don’t rush to Bond Funds or the Plus Fund: With market conditions the way they are, you might not meet some retirement goals by staying invested in equities but, if you limit your potential returns, you definitely increase the likelihood that you will not meet retirement goals at all.

3) We will look back on this as the biggest buying opportunity in the history of the market. Everything is “on sale” and will probably continue to be so for the next year. Take advantage of low prices.

4) Don’t reduce your contribution, increase it. Yes, a primary use of an investment account is to increase wealth. However, qualified accounts such as 401K, 403b and 457 also provide a shelter from current taxes; lowering contributions will allow Uncle Sam to take more of your earnings. Plus … see #3 above!"

I thought those were words of good advice and passed them along to the employees where I work. Being silent sends a message that we don't care about the worries of our employees. Providing calming words of timeless advice from a calm, financial friend is a better option.

Let me know what you think - email sandra@skysthelimit-hr.com or take the quiz on this blog page!