As more and more communities decide to enact mandatory "shelter in place" regulations in an attempt to stop the spread of the COVID-19 coronavirus, an increasing number of bank branches are reporting that customers are making big cash withdrawals. In fact, some banks have even run low on one-hundred-dollar bills, although most say they have plenty of cash to continue operating and can still provide withdrawals in fifties or twenties if they are short on hundreds.
While some media outlets encourage people to resist the urge to empty their bank accounts, citing the relative lack of security offered by "under the mattress" compared to a bank vault, a surprising population of authorities says you should probably get a little cold, hard currency out to keep on hand. According to many financial advisors, if you are nearing retirement then you should probably map out how much cash you might need over the next few months and make sure you have it on hand.
Liquidating Stocks vs. Emptying Your Bank Account
When people hear that financial advisors are telling clients to make sure they have multiple months' worth of cash on hand, the first thing they tend to feel is panic. However, there is a very important caveat that often does not "come through" when this information is relayed from one person to another: Most advisors are recommending investors whose retirement relies on payouts from Wall Street make sure they have cash on hand because in these volatile times, they might otherwise be forced to liquidate at a loss.
"The big thing is just make sure they have their immediate needs ready to go," said Shashin Shah, a wealth advisor based in Plano, Texas . However, that same advisor also said that younger investors with their retirement capital in the markets should probably be prepared to ride out the current market volatility. "The big thing is to just make sure they have their immediate cash needs ready to go," said Shah. He said he expects the markets to bounce back in the next two or three years, but "There is not any amount of risk that would make sense if there is money needed this year or the year after. It's important to map that out."
Either way, most experts say there is no need to empty your checking or savings accounts, but David Richter, owner at Simple CFO Solutions, says some small-business owners might want to consider keeping cash on hand "if they can manage it" in the coming months. "My clients are usually active real estate investors flipping, renting, and wholesaling, so I'm telling them to have at least two or three months of cash on hand," he said. "I love cash because it gives options: If you need to spend it or just want to boost the economy, you can."
If I Withdraw, Should You Withdraw?
One of the biggest cash-related conundrums for most Americans – investors and otherwise – in today's market is whether or not they should withdraw cash from their bank accounts now in case they cannot access it later. Although there are no official numbers available on the topic, the Wall Street Journal reported on March 18, 2020, that a number of U.S. banks and credit unions "have run low on cash as customers make big withdrawals."
Industry officials say the withdrawals "appear to be motivated by financial-market tumult over the coronavirus epidemic." In some cases, particularly near affluent neighborhoods, people are withdrawing tens or hundreds of thousands of dollars at a time. Not surprisingly, banking institutions are encouraging account holders to leave their cash in their accounts, arguing that it is much easier to rob an individual than it is to rob a bank and, furthermore, a federally insured bank or credit union is backed by the government for up to $250,000.
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