Retirement

401K Take a Hit? Don’t Panic, and Don’t Touch Your Accounts, Economist Says

Dr. Christopher Thornberg of Beacon Economics says everyone should take a deep breath.

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If you are looking at your individual retirement or 401K accounts as the coronavirus pandemic continues, you’ve likely lost thousands of dollars and the panic for you is real.

Dr. Christopher Thornberg of Beacon Economics says everyone should take a deep breath.

The idea that this necessarily is going to lead into a U.S. recession is, at best, over the top. We are not going into a recession right now.

Economist Dr. Christopher Thornberg

The stock market isn’t the end-all, be-all of our economy and considering what's happened with this global pandemic, what’s happening is normal, he said. Thornberg said the markets don’t like uncertainty and generally respond negatively during a crisis.

The sights of people hoarding at grocery stores, business closures and lay-offs have combined to create chaos in the markets but Thornberg says it may only be temporary.

If the coronavirus is contained and we have a better idea of how many people are infected over the next few weeks, we’ll see confidence come back and the markets will reflect that, he said. 

NBC4 breaks down what you can do to help yourself if you are facing financial hardship because the changes caused by the coronavirus. Randy Mac reports for the NBC4 News at 4 p.m. on Tuesday, March 17, 2020.

Right now he says take a break from looking at your investments even if you are near retirement.

Don’t start moving around money or withdrawing cash because the stock market can correct itself just as fast as it posts losses, and despite some record losses of late, we’re not on the brink of a recession, he said. 

“The idea that this necessarily is going to lead into a U.S. recession is, at best, over the top. We are not going into a recession right now,” Thornberg said. “Sit still. If you sell in a panic and then buy in the upturn you are guaranteed to lose money.”

David Shulman, senior economist with the UCLA Andersen Forecast, explains how tax deferments are just the start of measures the federal government will need to keep the U.S. economy from slipping into a much worse situation.

If you find the ups and downs keeping you awake at night, the best thing is to talk to your own financial adviser. There is no one-size-fits all plan.

You can usually borrow from a retirement or 401K account without any questions -- but you will pay taxes and fees for borrowing that money and you will have to pay it back.

Q&A

Question: Should I take money out of my 401K?

Answer: Speak to a financial adviser. But know that by taking contributions out, those contributions then get taxed as part of your income tax. You can take the money out if you feel the need to, but you're going to get taxed on it. You also get charged other fees. 

Question: What about people living paycheck to paycheck -- what can they do at this point for cash? 

Answer: There's the option to file for unemployment benefits immediately. The governor has waived the requirement that you must be unemployed for one week to file for these kinds of benefits. If you actually have coronavirus and you've been diagnosed, you qualify for disability. If you don't have it but you've just been laid off or your business has closed down, you can apply for unemployment benefits. It still may take a while to process that claim. The state of California said they're going to try to expedite everything as soon as possible but may not be able to get checks out for a few weeks. If you're out of work or currently furloughed, you want to apply for unemployment benefits immediately. Find information here.

Question: When a lot of people need money, they immediately turn to getting cash advances on their credit cards. Is that an option? Are credit card companies willing to help?

Answer: Not necessarily. You can always ask your bank if they will give you 0% interest. But again, you're taking on more debt. For a lot of workers, you don't know when you're going to be able to return to work or if you're going to be able to return to work. If you work for a small business, that business may not survive this. It's not advised to acquire more debt. Stay away from credit cards. An option may be to get a bank loan at 0% interest.

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