IMAGINE IF YOU DECIDED in January that you were ready for a new phase in your life. 

By December, you were going to retire once and for all.

You had promised yourself it would happen every year for a while now, but a decadelong bull run in the stock market and a company 401(k) match made walking away difficult.

2020 would be your year, though. It was finally time to retire.

Then a global pandemic began.

The Year So Far

It’s not just would-be retirees who’ve had to make some tough investment decisions this year.

The market has been impossible to predict, as the S&P 500 dropped a gut-wrenching 30% between January 1 and March 23 before recovering the entirety of those losses by mid-July.

No one could’ve foreseen what would happen in 2020, and no one knows what the second half of the year will bring. While that presents a number of conundrums for the average investor, for those on the verge of retirement, there’s really just one big question: What should you do?

It’s usually easy enough to answer that question.

One broad rule of thumb for building your retirement portfolio is to allocate 60% to stocks and 40% to bonds, with that ratio slowly leaning less toward risky stocks and more toward the safety of bonds as you age.

That said, the standard answer to that age-old question seems to have changed recently.

Bond yields have only gotten lower over the last few years, with yields on 10-year Treasury and 30-year Treasury bonds hitting all-time lows in March. Meanwhile, last quarter, stocks roared higher in a rally that saw the markets enjoy their best quarter in over 20 years, and the Nasdaq has enjoyed a breakout year as retail traders have piled into tech stocks.

With all that in mind, there are more questions to ask.

Should older investors flee to bonds, or try to catch the wave in the stock market? Should they pull all their savings and make a break for it, or stick around and see what happens?

In a world that has gone topsy-turvy – where the usual rules don’t apply and the market has never been less predictable – what should an investor on the verge of retirement do?

Everyone Has a Retirement Plan Until the Unexpected Hits

For some, that question will be answered for them.

Companies squeezed by the pandemic have begun cutting their employees, and older workers who are at higher risk may not feel comfortable returning to their offices and potentially exposing themselves to the virus.

The combination has seen the rate of early retirements rise this year as older workers sidestep the problems in the office entirely and begin to enjoy their golden years.

While retirees may no longer have full control over when they’ll exit the workforce, the fate of their investment portfolios is still in their own hands.

The problem is that a crisis like the one we’re facing can make even the boldest investors blink, and older investors may begin to withdraw from their accounts out of panic. That is the wrong answer, says Greg Klingler, director of wealth management for the Government Employees’ Benefit Association (GEBA).

“There’s definitely been a heavy influx of calls from and meetings with soon-to-be retirees and new retirees who are worried about the recent downturn in the market over the last quarter,” Klingler says. “Many ask if they should cut their losses and pull out of the market altogether – the reality is that if you have a properly diversified portfolio that aligns with your investment time horizon, this is probably the worst thing that you can do because you’re selling low.”

Klinger has done his research on exactly how quickly markets have recovered in the past.

“Based on the measurement of each recovery since 1900, the average recovery time for bear market (a downward swing of 20% or more) equities to return to bull market levels is about 3.2 years. So while you and your financial advisor should periodically assess and carefully consider rebalancing your portfolio, it’s essential to remind yourself that you’re investing for the long term.”

Paul Deer, director of advisory services at Personal Capital, agrees.

“Once you have a personalized, diversified portfolio in place, the hard work is done, but a critical step remains: rebalancing. Rebalancing is key to capturing gains in your portfolio, while maintaining your risk exposure,” Deer says. “If stocks had a good year, rebalancing will force you to take profit, and allocate those funds to another area of the portfolio. That way, when stocks take a dive, you’ve already taken some gains off the table. Given enough time, this can have a tremendous positive impact on an investor’s net worth.”

Deer hits on one of the biggest problems that retirees who depend on investment income experience: time.

In fact, most investors have plenty of time; the average American lifespan is longer than ever, meaning investors have to make their money last longer than ever during retirement.

Many Americans were already retiring earlier than they planned before the pandemic, and it seems likely that many will begin their retirement even earlier this year, which means they’ll have to stretch their retirement income longer.

That’s why choosing to cash out now will only hurt you in the long run, as Kei Sasaki, regional chief investment officer for Wells Fargo Private Bank in the Northeast, explains.

“If the market takes a sharp dive close to your retirement, it’s understandable to experience fear and a temptation to sell and go to cash. In many cases, this would be the wrong decision,” Sasaki says. “By going to cash, you will ‘lock in’ the value of the portfolio net of the market price decline. The downside of this strategy is that cash is earning nothing, and actually losing money after adjusting for inflation. This downside becomes magnified if the retirement period is long.”

Retirement Investing in a Pandemic: What Should You Do?

Staying the course and remaining invested is the right move, but what’s the best way for these would-be retirees to invest? Should they lean more toward stocks or bonds?

“Neither,” says Deer. “Don’t time the market by trying to pinpoint the ideal asset classes. You can set yourself up for success by establishing a personalized strategy that is designed to provide you with the right balance between growth and stability, regardless of the economic cycle.”

He adds, “For near retirees, this will generally mean keeping a diversified portfolio with a mix of stocks, bonds and alternative investments. The better diversified you are, the better prepared you are to weather whatever the markets bring next.”

“Retirement is an era that can last 30-plus years for clients,” notes Michael Pappachristou, wealth advisor at RegentAtlantic Capital. “That’s a long time to overcome short-term volatility. Having equities in portfolios provides the growth that many clients need to make their portfolio last throughout their lifetime. Adding fixed income investments provides (a) cushion against market swings, as well as liquidity to cover expenses.”

Building a diversified portfolio, rebalancing as needed and sticking to your overall plan are essential for surviving a wild 2020, but there’s one truly essential piece of advice every financial planner will tell you: Don’t panic.

Cashing out on a lifetime of investing gains due to fear will not help you retire with any additional peace of mind. In fact, investors who got out of the market during the first quarter’s sell-off are probably more concerned than anyone now that they missed out on an incredible rebound.

Sticking to your guns has never been as difficult as it is today, but it might just be the key to your long-term financial health.