He was 72 and had never seen so much money simply disappear. He looked at his statement again and — was he was reading it right? Yes, it said his account was down $12,000. In one month.

He composed an email to his advisor, half-joking that he hoped there had been some mistake, but definitely wondering: Should they sell all their investments related to stocks and just rely on cash for the rest of their lives?

Years of steady growth on the stock markets came to an abrupt halt recently as the world grapples with the fallout of COVID-19.

A robust economy in 2019 suddenly feels shaky in 2020 and there is talk of recession. Nobody knows what’s around the corner, but if you’re already feeling unnerved, any news seems like bad news.

It is understandable that you may have a case of the ‘what ifs,’ but it may also be counterproductive. The emotion of seeing a portion of your recent gains disappear may lead you to a course of action you could come to regret. Before you take action, here are some points you may want to consider:

A good plan… is built for all seasons

Tannis Dawson is a high net-worth planner at TD Wealth, who suggests that you shouldn’t let ‘what ifs’ drive your action. She explains that a good wealth plan should be built around your risk tolerance and time horizon, and that cashing out during volatile times may cause you to miss any market recovery. If you were to review the major market indexes after pullbacks in 2001 and 2008, you would see the market did eventually recover. She says clients who are worried and want to know how their plan is insulated from volatility, should contact their advisor and chat. “When an advisor meets with clients, they typically say ‘we planned for this, and we design their plan to help deal with this,'” she says.

Major market dips and recoveries

This chart shows the time it took for the S&P 500 Index to recover following significant market drops in 2001 and 2008. Source: Bloomberg Finance L.P., as of Feb. 7, 2019.

A good plan… offers perspective

Perspective is important, and Dawson points out ways people can put minor turbulence into perspective. “If clients are years away from retirement, advisors typically remind them that they likely do not need access to those savings right now. Time can help investments rebound from their lows before most investors need the money,” she says. For people who have retired with a good wealth plan, they might have two to three years’ worth of living expenses in cash or low-risk investments. Those investments will likely not be impacted by a market downturn giving any growth investments more time to recover.

A good plan is… personalized

In creating a wealth plan for you, an advisor can start by discussing your short- and long-term goals — whether it’s retiring at age 59, buying a sailboat for the cottage or planning a rich legacy for your grandkids. Advisors can then provide assistance in choosing investments that are appropriate for you and your goals. For instance, while cash is the safest type of investment, its low-growth characteristics may not be enough to reach your personal goals. Others may dislike the ups and downs of higher-growth investments. Usually people can choose a happy medium between both extremes.

A good plan… is realistic

Dawson points to one great disparity many clients have in their plans: They believe they will be able to live on 75% or less of their previous lifestyle costs. In reality, many people spend the same amount. The reason? Many newly retired people have the time and enthusiasm to do things they couldn’t do when they were working (like enjoying a luxurious European vacation) which can eat into their savings even if they are spending less day to day. With this in mind, Dawson urges people to be realistic about their future spending, and all their forecasting estimates, in order to help make a more accurate retirement plan.

It all comes down to trusting the plan

Talking with an advisor can help bring perspective and reassurance that you are on the right track. While news from the world or financial markets may be unsettling, Dawson encourages people to tune out the noise around them and focus on their long-term plan, which may be shielded from the short-term volatility of the markets.

“While the short-term results may be disappointing, the long-term view may show that recent history is just a blip on the road in seeking to achieve their goals,” says Dawson, “Don’t make rash decisions — it’s often why you have an advisor in the first place.”

— Don Sutton, MoneyTalk Life