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The Market has Crashed! Now What?

April 02, 2020

The stock market has a tendency to become volatile during times of national and global catastrophe. Whether it be war, politics, or a health crisis, the markets will react accordingly. When these drastic events transpire, the question of “what will happen to my retirement account?” is bound to arise.

This post is designed to take some weight off your shoulders and guide you through these tough times. Leading Retirement Solutions has a team of industry experts available to help and assist you with any and all retirement plan related questions.

The Current State of the Market

Dow Jones Industrial Average (DJIA) Market index over the last 10 years (macrotrends.net)

On January 30th the World Health Organization (WHO) declared the Coronavirus a public health emergency of international concern. With no vaccine currently available (as of this posting) to stop the spread, Governments around the world are implementing extensive public health measures with hopes of containing the virus. On March 13th United States President Donald Trump officially announced a national state of emergency. With health and safety being the top priority, thousands of businesses around the country have been forced to temporarily shut down, states have closed public schools, and social distancing has become the new normal.

As the death toll rises and panic surrounding the virus grows, markets around the world are paying the price. On March 9, 2020 the Dow Jones Industrial Average experienced the largest single-day point drop in modern history, which was immediately followed by two more record-setting drops. Economists are considering this to be the worst week of stocks since the 2008 financial crisis.

We Have Seen It Before

The graph displayed above shows the performance of the Dow Jones Industrial Average (DJIA) market index over the last ten years. Considering DIJA is the best-known market index, observing its performance can be insightful when analyzing economic trends over a period of time. As shown above, DJIA has been constantly fluctuating over the last ten years, with some shifts being more drastic than others. The United States has experienced multiple corrections, bear markets, and recessions over the years and will certainly experience more in the future. With that said, history has shown that the market has a way of bouncing back. Consider the 2008 financial crisis. In the 10-year period following the crash, the stock market soared, reaching unprecedented levels of growth.

“Be strong now because things will get better. It might be stormy now, but it can’t rain forever”

Think Long-Term

When faced with a market downturn, it’s important to think with a long-term mentality. It is easy to consume your thoughts with the daily noise of the crisis. Do not let the fear surrounding the current state of the market dictate your investment decisions. Considering the market is constantly changing, checking the status of your investments daily is not recommended. Retirement accounts are intended to be long-term financial vehicles.

What Plan Sponsors & Participants Need to Do

Retirement Plan Sponsors: During an economic downturn, retirement plan sponsors need to stay well informed on what they can and cannot change regarding their current retirement accounts. For instance, if a company decides to halt making contributions (e.g. matching, safe harbor match, non-elective contribution) to a retirement account, various notice requirements may apply. Our Leading Retirement Solutions Team wants to help and guide plan sponsors during these times of uncertainty. Check out our blog post on what Plan Sponsors Need to Know Right Now!

Retirement Plan Participants: It’s important to understand that when the economy is in turmoil, you are not the only one suffering the consequences. economic downturns effect business owners and employees alike. With that said, in order to stay up-to-date and ahead of the curve, strong communication between both parties is a must. Plan participants need to be aware of all changes that could potentially affect their plan. Additionally, speak with a financial advisor regarding your retirement account and how well it is performing. A qualified financial advisor will help guide you through the current economic downturn, while also focusing on long-term investment opportunities. For more information and guidance regarding financial planners visit our friends at Valentine Ventures! 

If you have questions about your company sponsored retirement plan (e.g. 401k, 403b, Defined Benefit, Pensions, ROBS and other plans), what you can and should do with your company sponsored retirement plan in anticipation of the long term impacts of COVID-19 and the financial markets, contact our team at Leading Retirement Solutions.

For Retirement Plan Sponsors and Entrepreneurs seeking additional information, be sure to check out our COVID-19 Frequently Asked Questions Guide.

If your employees have questions about how Covid-19 and recent Stock Market fluctuations will impact their company sponsored retirement plan, have them check out our recent blog post.

 

For more tips and information regarding retirement plans, contact us.

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About The Author

Keyvan Khaki is a student at the University of Washington School of Business. He is a Brand Content and Marketing Intern at Leading Retirement Solutions. For more information on Keyvan and the work he is pursuing, be sure to check out his LinkedIn. 

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