January 18, 2021

Retirement Savings During the Pandemic

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From the Great Depression in 1929 to the Great Recession of 2008, history has taught us that the stock market can plummet at a moment's notice. The COVID-19 pandemic is no different. Our economy has struggled and many near-retirees are struggling with financial uncertainty.

According to Ken Dychtwald, head of consultancy Age Wave, those who are five to 10 years from retirement age “are getting the wind kicked out of them. Their portfolios are taking a hit. They can’t work longer with [high] unemployment. Their mom is sick, and their kids are moving back home.”

Near-retirees between the ages of 50 to 64 say their confidence about retirement savings has fallen from 65 percent pre-pandemic to 48 percent, according to a poll by Edward Jones/Age Wave released in August.

With financial loss affecting near-retirees hard, here are some tips on how to navigate through the highs and lows of retirement in the age of COVID-19.

Delay Retirement

At first, the idea of early retirement may sound appealing. However, experts indicate that it can also lead to more financial unrest. It may be in your best interest to stick with your job if you are five to 10 years away from retirement.

“The best way to improve retirement financial outcomes is to work longer,” says Jamie Hopkins, director of retirement research at Carson Group. “A year or two before retirement, we see people tighten their belts and reduce spending, but that has minimal impact versus working six months to a year longer.”

Count On Cash

Having a cushion of cash can help when your savings starts to run out. But most people don’t just have a suitcase of bills lying around. There are other ways to liquidate assets to provide some peace of mind during a pandemic.

One solution is to have anywhere from 18 months to three years of expenses in liquid assets. You can use an early retirement package or severance as a liquid income stream to keep you on your feet longer.

For small-business owners near retirement, having two years of cash available can help keep operations moving forward until business picks up or you decide to sell the business. Also, try cutting expenses, working with vendors or taking advantage of pandemic aid.

Lastly, think about your home as a possible source of cash. As it becomes less common for seniors to pay off their mortgage by retirement, and with interest rates at record lows and housing prices holding up, some advisors recommend refinancing. According to Jamie Hopkins, director of retirement research at Carson Group, refinancing might make sense if the rate on your mortgage is a percentage point or more than the current rate.

Cut Extra Expenses

One way to help stay ahead of an economic collapse is to control your budget. Do you have to buy an extra gift for your grandkid? Do you really need that magazine subscription? Cutting unnecessary spending may not be fun, but it is one small move you can make that may have a big impact on your finances.

The four main areas to focus your funding efforts are food, utilities, shelter and transportation.

If you need assistance, it may be a great time to reach out to a financial advisor who can assist you in making these changes.

Stay Calm and Carry On

One of the driving forces behind an economic and stock market crash comes down to one word: panic. With so many businesses and industries slowing down due to quarantine, it can be tempting to retreat from investing. However, as the saying goes, the past is a good indicator of the future.

Chris Hogan, an advisor at Ramsey Solutions, says the nation has historically always bounced back from economic collapses. For instance, it took a little over a decade for the economy to thrive after the Great Depression, and when the market took a nosedive after the attacks on Sept. 11, the stocks were back on track two months later.

So what can we learn from this? Don’t panic. Don’t be reactive and look at the big picture, rather than what is happening in the moment.

Should you get a senior-friendly part-time job? How can you invest in savings? If you are looking for extra tips on saving for retirement, read our blog post that offers quick and easy solutions for the road ahead.

^{The above content is shared for educational and informational purposes only. The content is not intended to be a substitute for professional or financial advice and should not be relied upon for making financial or other decisions. Please consult your attorney or financial advisor before acting on any content on this website.}