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5 ways to ensure the coronavirus outbreak doesn't cripple your retirement savings

A woman wearing a protective mask walks past the New York Stock Exchange on March 12, 2020 in New York City.
Pablo Monsalve | VIEWpress | Corbis via Getty Images

The recent market volatility may have you wondering just what to do with your retirement account.

You may be thinking of heading for the exit — or perhaps you want to buy some stocks on sale.

While stocks rallied the third straight day on Thursday, they have yet to make up the steep losses from the coronavirus sell-off. The Dow Jones Industrial Average, S&P 500 and Nasdaq all entered Thursday's session down at least 24.9% from their respective all-time highs set last month.

Financial advisor Mitch Goldberg, president of ClientFirst Strategy in Melville, New York, said the last few days of reprieve have given investors time to think.

"When you are bombarded by a ton of information, it's difficult to make a decision," he said.

"It's only after you have time to contemplate what you've learned and how it relates to your own situation that you can really make a smart decision."

However, remember that it is normal to feel anxiety amid the market volatility. The key is not to immediately act on those emotions.

Before you make a move, you should take several factors into consideration.

Avoid pushing the panic button

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Not acting out of panic may be easier said than done — after all, it's a natural emotion for humans.

Just don't panic about the fact that you are panicking, said financial psychologist Dr. Brad Klontz, associate professor of practice in financial psychology and behavioral finance at Creighton University Heider College of Business.

In other words, don't act on your impulses just yet.

"That vacillation between excitement and panic — that is what hurts people financially," said Klontz, a member of the CNBC Invest in You Financial Wellness Council

You can put some distance between your impulse to act and your behavior by taking a few deep breaths. It may sound trite, but it does relieve stress. Also, consult with a financial expert. This will not only ensure that your asset allocation is correct but allow you to pause before taking action.

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It may be hard to tear yourself away from watching the daily market moves. That's OK. Just remember, past history shows that the market always eventually recovers.

Check your portfolio allocations

You need to have a plan for your 401(k): Bone Fide Wealth president
You need to have a plan for your 401(k): Bone Fide Wealth president

Your retirement date should determine how you are invested. Younger investors should be much more aggressive because they can withstand market swings. However, if you are less than five years away from retirement, you should be more conservative with your investments.

Make sure you check on your allocations, as your original target — for example, 60% stocks and 40% bonds — may have shifted. If you are young, you may consider adjusting future purchases toward a higher percentage of stocks to take advantage of the market drop.

If you are older, you may want to consider moving some stock funds that have overperformed and buying more fixed-income investments, which are considered safer.

Examine your 401(k) contributions

If you want to up your contributions to your 401(k) to take advantage of low stock prices, only do so if you are financially sound. That means you are secure in your job and income, no credit card debt and a solid emergency fund.

How to stay financially sound during the coronavirus pandemic
How to stay financially sound during the coronavirus pandemic

If you have little or no cash cushion, consider reducing your contributions and directing that money into a high-yield savings account. However, you should continue to contribute enough money to your 401(k) to get your employer's matching contribution.

Consider a 401(k) loan ...

If you are strapped for cash, you can take a loan from your 401(k).

The stimulus bill passed by Congress Friday relaxes the rules around retirement-plan loans, allowing you to borrow up to $100,000 from your 401(k). That's double the amount you can normally take.

Experts tend to suggest this as a last resort, since any cash you take out will not be earning money for you as an investment.

However, it is an option to help pay bills and have money on hand in the event of an emergency.

... Or a 401(k) or IRA withdrawal

In this time of crisis, you'll also be allowed to take a hardship distribution of up to $100,000 from your 401(k), 403(b) or individual retirement account at any age without a withdrawal penalty, according to the stimulus package. It passed both the Senate and the House is now headed to President Donald Trump's desk for signing.

Normally, if you take a withdrawal from your 401(k) or IRA before age 59 ½, you are subject to a 10% penalty.

Worried about market fluctuations? Don't worry and stay the course
Worried about market fluctuations? Don't worry and stay the course

You also have to pay income tax on the amount taken. However, the bill gives you the opportunity to pay the taxes over the course of three years. You also have the option of repaying the amount you pulled from your account over that time.

"The biggest consequence of withdrawing money from your retirement plan is that you are losing out on that money compounding for years and years and years and you are going to have to put away even more money in the future to make up for that loss," Goldberg said.

Be sure to check that your workplace's plan allows hardship distributions — it isn't required to do so. Even if it does permit them, check in with your human resources department or plan administrator before you proceed.

The bottom line

This is a time of uncertainty. It's normal to be concerned about what's going on with your investments. Just remember, how you react depends on your specific financial situation as well as how close you are to retirement.

"You have to do what you have to do to survive this period so you can thrive when you come out of it," Goldberg said.

"And we will come out of it."

If you have questions about how to manage your money during this pandemic, submit them to our experts. We'll then post the answers on Invest in You in the coming days.

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CNBC's Darla Mercado contributed to this report.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.