What to do if your retirement savings have been decimated and you're planning to retire soon

retirement age couple with financial planner

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For younger investors, who still have decades before they're hoping to retire, the recent coronavirus-fueled market plunge isn't much of an issue. As long as they can avoid looking at their account balances, the slide is actually more of a boon, as it presents lower stock prices now, and long-term opportunities to recoup losses.

But those older folks who are planning to retire soon are facing a very different reality. Many have seen their retirement savings decimated by the market's response to the COVID-19 outbreak and are left wondering how to recover. Should you leave the funds where they are? Readjust your budget? Pull as much cash as possible?

The good news is that you do have some options, and we spoke to Certified Financial Planner Ryan Serrecchia, executive vice president and partner at EP Wealth Advisors, to help walk through them.

Remind yourself of the plan you had in place before the pandemic

"There are a lot of factors that go into deciding what to do in this situation," explains Serrecchia, but in all cases, he recommends beginning with the same step. "It's important to look at the plan you had before you entered into this market; how much cash do you have on hand? Do you have an allocation that's balanced, where you don't have to draw from your equities?"

In essence, now is the moment to look closely at your portfolio, specifically at the balance between your stocks and bonds. Wherever possible, avoid selling stocks in this moment, as doing so while the market is low will almost certainly force you to take a loss. 

Your best bet for recovering those losses is by remaining in the market over time, so now is the moment to allow yourself to be cushioned by the measures you've (hopefully) put in place for a situation such as this one.

Don't be afraid to spend liquid capital

If you have enough cash to float yourself for the time being, that's the course of action Serrecchia recommends. "Once you've reviewed your portfolio, there may be different considerations for different people," he advised. "If they're all equities, with cash on hand - ideally covering six months of expenses - you may want to consider spending the cash."

It can be terrifying to spend down an emergency fund, especially during this period of uncertainty. But just remind yourself that by spending it, you're buying yourself a little more time for your equities to recover. And with your retirement so close on the horizon, every day counts. 

All investments are not created equal

At first glance, it might seem as though all areas of your portfolio are suffering equally, but that's not necessarily the case. Especially if you've held onto a mix of stocks and bonds instead of relying solely on stocks. 

Even as the Dow Jones Industrial Average has plunged, certain stocks are indeed up - for example Netflix, Peloton, and Zoom Video Communications, which are all experiencing coronavirus-related surges. 

Selling in areas that are soaring rather than plunging is one way to pad your pocketbook, but again, it should be a last resort. Serrecchia urges: "Remember that emergency funds are here, and that this is why we have them."

Adjust your budget

Even if this moment has caught you without cash on hand or without a diversely allocated portfolio, this isn't the moment to lose hope. (Or to get overly creative in trying to make miracles with an uncooperative market.) One area that you can control is your own spending, so Serrecchia instructs his clients not to shy away from reworking their budgets.

"If your strategy has been overly aggressive and you find yourself with no cash reserves, then it's time to tighten the belt. You should always consider lessening expenses before you pull from your investments," he says.

Serrecchia even has a few ideas for which habits to change, wrapped up in a silver lining of our quarantined times. "Our current moment could provide opportunities to build less expensive habits - like eating at home and not going on vacation. "

But no matter your situation, Serrecchia emphasizes again that selling off assets should be at the very bottom of your list of solutions. "By their nature, those assets are meant for longer-term needs, so they should be considered a last option."

Talk to a financial planner today about your retirement strategy. Use SmartAsset's free tool to connect with a qualified professional »

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