How COVID-19 Has Changed Retirement Planning
Staying productive in the midst of COVID-19 can be a challenge. Rather than pulling out board games, you might want to use the opportunity to stress-test your plans for early retirement. Specifically, if you are preparing to retire soon, this could be an ideal time to examine a few aspects of your future life and look at ways to improve or rework them.
In mid-March 2020 when the pandemic hit America, the country was effectively shut down. Business operations were put on hold and millions of Americans were left without employment. The coronavirus affected everyone throughout the world and has changed how many people look at social interaction, financial security, and long-term planning. Planning for retirement early and with a professional financial planner can be the key to making smarter financial decisions that give you longer-term security.
The coronavirus has changed retirement planning in many ways. The pandemic can help prepare you for the adjustment of an influx of free time and adjusting the way you look at your financial portfolio. This can be a great opportunity to work to improve and/or adjust your plan for the future.
Prepares You For Having More Free Time
Most retired people don’t spend all of their time at home. You might find that “sheltering-in-place” may give you a taste of how you will cope without a job to go to every day. While no one was expecting to be stuck at home, it did give people a chance to pause and get creative with what to do with their free time. Many who are approaching retirement age use sheltering-in-place as a time to think about what a meaningful path for their life might be once retired.
Take the opportunity while home to list ideas that come to mind for what to do during retirement. Whether it might be for another business, volunteer work, or just pursuits that might suit you, you may be surprised at what you come up with. If you are married, don’t forget that you will also be spending more time with your spouse. Now would be a good me to check in and make sure that your retirement paths aren’t at cross purposes.
Might Delay Your Timeline For Retirement
The spread of the coronavirus has had a significant effect on stock market volatility. People may have noticed the amount in their retirement funds has decreased due to the pandemic and the massive hit our economy took. Many are looking at the option of delaying retirement and working a little longer. According to The Washington Post, those extra years may help boost savings while you’re waiting for the U.S. economy and stock market to recover.
No one was prepared for the pandemic to hit. It’s safe to say that life will not return to “normal” for years. Our country is in the process of adjusting to wearing masks and staying physically distant from other people. This change will also likely affect travel plans and leisure activities. Working for a few more years while waiting for the world to return to a state that resembles pre-pandemic could be mentally and financially beneficial. If you’re healthy and have a stable job, working a few more years might make a huge difference.
Retirement Funds Could Be Altered By New Laws
Bills going through Congress and signed into law at the White House might alter your retirement in some significant ways. Many of the changes relate specifically to taking money from various retirement accounts. Pay attention to the bills signed into law and work with a retirement professional to determine how these affect you. Understanding the economy and how it affects you might be a great first step in managing your portfolio.
A quick overview: this year you are now able to waive your required minimum distribution for the year. This only applies to the year 2020. Similarly, in 2020, you can take a distribution of up to $100,000 from certain retirement accounts. This would be without the usual 10% early withdrawal penalty for those to whom that would ordinarily apply. For your workplace retirement account, you can take a loan of up to $100,000 (normally $50,000).
With all of these actions, it’s important to note that the intent of these measures is to help those in dire financial need. If you’re considering withdrawing from retirement, it might be beneficial to proceed with the help of your trusted retirement professional.
Patience May Pay Off
Watching a decline in your finances during a pandemic can be frightening. While it may feel beneficial to pull money out, it’s important to note that you’re cementing the loss of funds. YouGov surveyed 9,675 U.S. adults and got a deeper read on how coronavirus affected retirement planning. Forbes reported that nearly 72% of respondents reported they have not changed anything about their planning due to COVID-19. This is likely due to people wanting to ride out the market volatility wave hoping their portfolio will bounce back.
There is no guarantee that your retirement portfolio will go back to normal and/or get better. What we do know is that businesses across the country are adapting to our new world amid coronavirus. Long-term investment planning takes skill and patience. Working with a trusted financial planner in your long-term planning can be a great tool to financial stability and confidence. You may want to take the time and educate yourself on how COVID-19 has affected your retirement portfolio personally and examine ways to improve. Learn more about Pathway Financial Planning and how we can help you safely and efficiently navigate transitioning to retirement.