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With the sudden closure of millions of businesses across the United States due to COVID-19, many investors are wondering if they will be able to retire on time. Here are three ways to protect your 401(k) during the coronavirus pandemic, and how your accountant can help. 

How to Prevent Additional Losses During COVID-19

1. Don’t Cash Out

While many investors are tempted to cash out their holdings and retire early, cashing out means you secure your losses. While the economic recovery may take time, chances are high that many strong businesses will recover, which can be good for exchange-traded funds (ETFs) and money market accounts alike. 

Cashing out also makes you responsible for paying capital gains taxes. Capital gains taxes range from 0% to 20% of the amount your assets appreciated, depending on your personal tax bracket. By keeping your money in the market for the time being, you can avoid paying these taxes for as long as possible. 

2. Buy Low

accountantWhile things can seem bleak during a down market, it’s important to remember that it represents a crucial buying opportunity. When the stock prices are low, leverage your financial future by investing in companies you believe have a strong future.

For instance, since travel took a hit during the pandemic and many of those stocks are low, investing in an airline, cruise line, or travel agency with a strong balance sheet may be a promising investment. 

Before you invest in any company, sit down with your accountant to talk about the business's financials. Your accountant can check the amount of debt the company has and how much money they have in reserves, making it easier to tell if they will rebound successfully. 

3. Diversify Your Portfolio 

Since you never know which companies will declare bankruptcy and wipe out owners' equity, diversify your portfolio as much as possible. If most of your money is in the stock market, consider investing in surety bonds or even physical assets, like real estate or gold. 

 

Anytime you are concerned about the health of your investments, it pays to sit down with the accountants at Balanced Bookkeeping & Tax Services in Lincoln, NE. Since founding their business more than 20 years ago, this company has been committed to transparency, professionalism, responsiveness, and attention to detail, helping people to keep track of their expenditures and taxes. Learn more about how they can help you by visiting their website or by giving their office a call at (402) 466-4272.

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