The worst of the pandemic is hopefully behind us. So how do we strengthen our retirement outlook after taking such a huge financial hit? When planning for your retirement, you’ll need a strategy and a strong will for dealing with the unknown.
As we are navigating and correcting the challenges that came with COVID-19, we face unexpected emotional and financial hurdles. To cope with this new reality, we have to think in new ways, re-prioritize and get creative so that we make the most of the resources we have and potentially figure out how to make do with less. Even if temporarily while we get back on track.
But when it comes to money, being creative doesn’t mean the old ways of managing are thrown out the window. Sometimes doing less is more.
When it comes to long-term investments like retirement savings, Americans shouldn’t panic. U.S. stocks eased on Tuesday after the S&P 500 hit a record high earlier in the session, as investors awaited cues from the Federal Reserve about whether a recent jump in inflation would prompt a sooner-than-expected tapering in monetary policy.
The benchmark S&P 500, the blue-chip Dow Jones and the tech-stocks focused Nasdaq have gained 13.3%, 12.3% and 10%, respectively so far this year, largely driven by optimism about an economic reopening. Even if markets decline again, savings in employer-sponsored retirement plans haven’t historically dipped as much as the general market, according to data from the Investment Company Institute.
So if you’re near retirement, you’ve likely experienced three or four bear markets. Keep in mind it typically takes 6-7 years for markets to recover to their original numbers once a bear market ends.
If your savings strategy has been knocked off course due to COVID-19, it’s not too late to revisit your retirement income plan altogether. You can, if necessary, create a new plan.
Before you do so, run your numbers again to see if you need to adjust. A generally accepted rule of thumb for retirement planning is that you should have, at minimum, 80 percent of the yearly salary you earned while working. This is sometimes called “replacement income.” So if you made $100,000 a year while employed, you should have at least $80,000 per year available to spend during retirement.
That’s the start. Multiply that figure by the average life expectancy post-retirement to determine the total minimum amount you need. Anything above that and you’re generally in good territory. (Check out our online retirement income calculators for help here.)
Once you have a general understanding of where you’re at in your savings strategy, it’s time to see if your current plan needs adjusting to ensure you get back on track ASAP.
If after revising your previous retirement plan has revealed holes in your savings, there are ways to catch back up without changing your entire strategy: If your income has dropped, try to lower fixed costs to make the most of what you have.
Here are some tangible ways to do just that:
- Review your utility bills to see if you can lower usage, and contact your providers about lower-cost options.
- Negotiate fees with cable and internet companies.
- Look at your cell phone usage and what you may be paying for things like unlimited data that you may not need.
- Cancel streaming or other services you don’t use.
- Review your auto insurance coverage and deductibles. If you’re not driving much, you may be able to lower your premiums.
Actually, re-evaluating your fixed costs and looking for ways to save is a smart move at any time. You may find that the changes you make to cover today’s circumstances have long-term benefits, giving you more money to direct toward other goals when things get better and cash isn’t so tight.
Have a New Written Plan
It’s important now more than ever to have a written plan in place.
Investors are used to an investment policy statement which helps direct them in good times and bad. Why not have a retirement policy statement to direct your spending and other actions during “normal years” and during times when retirement shocks occur? A plan for how to handle your retirement ship in good weather and bad will be useful to quell your anxiety about the unknown.
It’s hard to think about the future when you’re struggling in the present, but try to keep looking forward. If you have income, be smart about every penny and if you can, keep saving.
Finally, don’t be shy about asking for help. Whether it be friends and family for moral support, or speaking with a professional about the best course of action moving forward.
Overwhelming numbers of current retirees say they would have saved more for retirement if they had it to do over again. Take their advice and find an investing expert you trust to help you start your new retirement savings plan.
Retirement Income Planning with CKS Summit Group
CKS Summit Group is a retirement income planning firm headquartered in Clinton Township, Michigan with clients throughout the United States.
Our focus is to bring you fresh new ideas for your retirement income. Our cutting edge tactical portfolios help our clients achieve safe, healthy growth of their savings and preservation of their principal balance.
We design plans which are specifically structured to limit downside stock market risk. This allows us to protect our client’s assets while providing them with strategies for achieving effective tax reduction and inflation protection.
Come experience the new evolution of Retirement Income Planning with CKS Summit Group. Contact us here to set up your complimentary strategy session today.