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During times of economic uncertainty, consumers tend to shift away from making investments—especially those that play roles in retirement planning. Following these trends, many may shy away from making 401(k) contributions in response to the economic effects of the COVID-19 pandemic. Is this a wise strategy? The answer can depend on your circumstances, but it’s generally not smart to stop contributions until you gain insight from a qualified financial planner. Here’s why.

Potential Advantages to Continuing Contributions

As the stock market experiences dramatic dips, watching the value of your 401(k) drop can be alarming. However, this doesn’t mean that it’s permanently down. It’s only down until the markets turn around. By leaving your money in the account, you won’t face early withdrawal penalties, and you may eventually recoup these momentary losses.

If you’re still making an income, making contributions during this time may also give you a long-term advantage. Specifically, you’ll be able to purchase assets at lower prices to bolster and diversify your 401(k). When the market resumes upward trends, your retirement savings can grow.

How to Decide Which Option Is Wisest

retirement planningEveryone’s financial situation is different, so reshaping your retirement planning strategy should require careful consideration. Before you make any moves, work with a financial advisor; they can examine your current circumstances and income to identify opportunities to save money and build wealth, such as by contributing to a 401(k).

With an in-depth understanding of the markets—even those that remain unpredictable—financial planners can also help direct your contributions so that they go toward low-risk sectors, well as those that are poised for growth.

 

When you’re concerned about your 401(k) strategy, it pays to work with a trusted planner from Family Financial Partners. Headquartered in Lexington, KY, their team of financial advisors and investment planners has helped numerous clients with retirement planning since 2005. Call (859) 219-1006 for an initial consultation, or go online to learn how they can help you. Visit feeforplan.com for more information about financial plans tailored to your unique stage of life.

Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. Asset allocation does not assure a gain and does not protect against a loss in declining markets. Past performance is no guarantee of future results.

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