Does it feel like the coronavirus has pushed all your retirement plans by the wayside? If your financial situation hits a rough spot, there are things you can do to get your retirement plan moving in the right direction again.
If your retirement plans feel jeopardized due to COVID-19, you’re not alone. Even before the pandemic hit, a Planning and Progress Study showed 78 percent of respondents were “extremely” or “somewhat” concerned about affording a comfortable retirement and nearly 66 percent said there was some likelihood of outliving retirement savings. Throw global financial crisis in the mix and your retirement dreams may seem to be fading away.
While the initial shock makes it hard not to panic, not all is lost when it comes to your retirement plan; Retirement plan disasters can be mitigated. Try the following four strategies to minimize the long-term effects the coronavirus pandemic has on your finances.
1. Revisit Your Initial Plan
Just because you already have a plan in place, that doesn’t mean you can’t make adjustments as you go. Putting a plan to paper around your retirement strategy is so important, especially after COVID-19. Working with a professional to evaluate your income, budget, spending levels, savings, investments can help you understand your options around retirement and execute a thoughtful more successful long-term strategy.
Think about what expenses are essential to your retirement needs, and determine what your strategy will be to meet those most important needs. Determine what income sources are going to provide that important foundation for retirement. Understand what you need to do in order to fund your retirement, and have a plan A, B, and C, so you know what you can pivot to and still feel good about if factors that you can’t control derail one version of your plan.
A derailed strategy is not necessarily a doomed one. While you may not have control over such uncertain times, you can get working on a new, revised plan.
2. Catch-Up Contributions
You may find a slew of tantalizing reasons to stop contributing to your retirement account during the COVID-19 recession, and therefore wondering if you should keep contributing toy your retirement accounts.
If you are still employed, you need to keep contributing to your employer-sponsored plans, like a 401(k). Time is on your side. Most of us have years, or even decades before we will need the money. For those who are in their fifties, or even sixties, you will need this money to last another 20 or 30 years (maybe more). You have time for your retirement investments to recover. Those who panicked and stopped contributing, or worse, pulled their money out, could find themselves further from achieving financial freedom.
For 2020, you can contribute up to $19,500 to a 401(k) as an employee. For those who are 50 or older, you can also make a catch-up contribution of $6,500 for a total of $26,000 into a 401(k) for 2020. Self-employed individuals can potentially contribute $57,000 into a Solo 401(k) in 2020, or $63,500 if you are at least 50 years old. If you need a little more motivation to keep the money flowing to your 401(k), you get a tax break for the money you invest. You may also receive a matching contribution. Most matches are between 50 cents to one dollar for every dollar you contribute. This means your investment accounts would need to drop by 33 to 50 percent before you start not coming out ahead immediately.
Getting money out of a retirement account is a little easier right now during the coronavirus pandemic, thanks to the CARES Act. There are some rules that need to be followed here, so talk with your tax preparer and Financial Planner and be proactive in keeping your income taxes to a minimum.
3. Diversify and be Flexible
Right now you should be looking for new and innovative ways to make your retirement dreams a reality.
Saving more and spending less may not be what you were expecting as you approach retirement, but it may – at this time – be necessary. Perhaps you’ve found yourself in a new position over the timing of your retirement, in which case working a few more years may significantly help you add to your retirement nest egg, or rebuild it if you had to tap into it to pay bills.
Working longer can also decrease the number of years you will need to rely on your retirement assets when you do retire. Find out if your planned retirement age is realistic here.
4. Hire a Financial Adviser to Help You Stay the Course
Everyone can use a little extra financial guidance, especially during the COVID-19 pandemic. It’s difficult enough investing when the economy is humming along, but it’s even harder in unprecedented times like these.
A reputable financial advisor like CKS Summit Group can help you stay level-headed and focused on your long-term retirement goals. They can also help you develop a more holistic plan that will encourage you to look at the “big picture” while developing plans which are specifically structured to limit downside stock market risk.
Final Thoughts
In today′s world, the importance of a well-executed retirement plan cannot be underestimated. These are challenging times, for sure. You’ll have to make hard decisions, but remember what you’re working toward – a comfortable, carefree retirement.
It’s not too late to get your retirement plan back on track. Reach out to the retirement income experts at CKS Summit Group here today to bring you fresh new ideas for your retirement income.
