Coronavirus The epidemic has been a huge financial pressure on Americans, as they suffer through furloughs, layoffs and pay cuts. Some people have stopped or reduced the amount they are putting into retirement accounts, and some have Tapped into 401 (k) Or to help cover bills to the IRA.
“This year has been the most stressful period for our customers,” says Jeffrey Corliss, managing director and partner of RDM Financial Group at HighTower in Westport, Connecticut. “Not only did the market fall, but we had epidemics and social issues. It was a difficult year. “
Here’s how the epidemic has affected retirement planning:
- The stress level is high.
- Less savings for retirement.
- Emotional decision maker.
- Forced early retirement.
- Less expense.
Stress levels are exceptionally high
When you are facing immediate financial concerns and worried about the future, it is difficult to focus on financial preparedness for retirement. “Everyone climbed the anxiety ladder because of COVID,” says PJ DiNuzzo, president of DiNuzzo Wealth Management in Beaver, Pennsylvania, and author of “The Seven Keys to Investing Success.” “If you came into it with no worries, now you are worried. If you are worried, now you have high anxiety.”
Sticking to an investment plan can be especially difficult when stock markets are wild. “There are so many unknowns and so much uncertainty as to how you will resolve some of these issues,” says Greg Hammer, president of the Greater Hammer Financial Group, in Indiana. “People are scared right now. They panic at making big moves. Many people are sitting on the banks, sitting in cash. “
Low savings for retirement
Those who have been deported or laid off are not able to take advantage of the automatic deduction to contribute to their workplace retirement accounts. “People are not working, so they are not contributing to their 401 (k) s,” Hammer says. “Even though they are getting unemployment benefits, they are not getting automatic contribution to their 401 (k). People do not have the discipline to save outside that structure. “
Additionally, the CARES Act made it easier for people to take it Early return And loans from retirement accounts. “People should avoid tapping into their retirement accounts,” Hammer says. “They should watch their spending. If possible, they should start saving as soon as possible.”
If you need to do it temporarily Stop saving for retirement, When you find work again, it is important to develop a plan to resume the contribution. “If someone has lost income and is not contributing to the retirement plan, it is more important for them to sit down with a consultant,” Corliss says. “Keep an account of where you are and what you are spending. Ask what are the things that you can do to reduce expenses, and develop a strategy for how to recover when you return to work. “
Making emotional decisions
Avoid making emotional decisions about your retirement savings and investments. “Don’t let fear and emotions control your investment decisions. A lot of people are letting this happen, “says Hammer. They are making changes in investment and exiting the market. There is a lot of emotions. “
While you may need to immediately address a health crisis or child care issue, try to stick to your long-term plan if you can. “We’re going through all kinds of things affecting you mentally as well as financially,” Corliss says. “Many times it is clear that everyone’s financial plan is sidelined and blown sideways. It is about sticking to the plan, and it will help you succeed. “
People facing crisis are the ones with the best financial planning. “The more time you spend on planning, the less you spend,” says DiNuzzo. “The more time you spend on a quality plan equals less worry and less worry.”
Forced early retirement
Older workers who have lost their jobs and were unable to find new employment during the epidemic may be forced into retirement years than employed. The one Enter retirement Unexpectedly, your savings goal may decrease quickly. taking Social Security early benefits You may suffer losses due to taking advantage of thousands of dollars in your lifetime.
If you feel that you have an additional income due to out-of-home social engagements and reduced spending on recreation, consider increasing your retirement account contributions. You can qualify for this by adding additional funds to a retirement account Tax deduction, And your savings can increase in value during the stock market recovery after the epidemic ends.