COVID-19: Should You Change Your Retirement Strategy?

Retirement Strategy

Following the outbreak of coronavirus, every country today is facing a financial crisis. Does this mean we should change our retirement strategy? If yes, then the question is how? Keep reading this blog to get an answer to this question!

A Crisis Without Precedent

While it is usually useful to draw and consider the lessons of the past, most of the time history has little to offer. 

Unlike the Great Recession of 2007-2009 or the Great Depression of the 1930s, for instance, the current economic crisis is not driven by financial fundamentals. Instead, it is a result of society’s deliberate struggle to control and combat the spread of a virus by shutting down large parts of the economy.

The closest parallel may be the so-called Spanish Influenza pandemic of 1918, however, that played out at a time before Americans gave much thought to retirement and when life expectancy in the United States was notably shorter. 

Also Read: Money Saving Tips to Survive a Recession

Your Current Job Status

One of the common questions today is, what is a conscientious retirement saver to do? Well, it’s completely based on whether you have a job or not. 

  • Working People 

Those who are fortunate enough to still have an income source—either through their own work or that of a significant other—may be in decent shape to ride out this crisis. 

No one can predict how long this will last, for sure, however, having enough cash flow to meet the bills can eventually secure an individual from relying on his or her retirement savings. 

If you are still saving for retirement through a 401(k) or similar plan, do not make coronavirus a reason to stop your contributions, even if your employer, like many, has temporarily suspended its match. 

In fact, if you are working from home, then we are sure you will have more cash available now because of no commuting expenses, less-frequent dining out, and so forth. 

Hence, this is the right time to put even more money aside for retirement by contributing to an IRA. 

Also Read: Best High-Yield Savings Accounts For 2020

  • Non-Working People 

Individuals who lost their jobs due to the pandemic are obviously in a different situation. If you are also one of them, then you should focus to preserve your retirement savings to the extent possible. This means you should take benefits of unemployment insurance & various other assistance you are eligible for through existing programs or the recent CARES (Coronavirus Aid, Relief, and Economic Security) Act. 

You can also consider negotiating with your creditors including your mortgage lenders as well as credit card companies, to cut down, postpone, or spread out any payments you owe them. If you have an emergency fund, then you must tap it first. 

No matter what you decide to do, do not neglect your health insurance. A huge, unexpected medical bill will not just be financially devastating but also result in bankruptcy. 

Not considering medical attention if you require it can even result in worse outcomes. An individual with health insurance can also check his or her insurer to extend the payment deadlines. And if you have lost your insurance, then you can be eligible for a special enrollment period in the federal government’s Health Insurance Marketplace. 

Finally, if the current financial crisis has cut into your retirement savings, or made it difficult for you to continue the contributions, then you may think about retiring a little later than you originally planned. 

Working a little longer will eventually help you to save more, and delaying Social Security will give you bigger monthly benefits when you start to collect them. 

  • Retired People 

People who already left the job voluntarily are in yet another situation. Are you one of them? 

If your retirement income—from Social Security, pensions, and systematic withdrawals from your IRAs and other retirement accounts—is enough to pay the bills, then you are not supposed to do much of anything.

But it can be difficult, however, if you have adult children who saw their incomes vanish following the pandemic. The impulse to aid your kids can be admired, however, it can be a problem if you spend all of the savings that you have planned to depend on for retirement. 

Build An Emergency Fund

Most people who did not have an emergency fund before the pandemic regretted during this difficult time. And if you had one, you will have drawn it and are required to replenish it. 

Also Read: Ways To Save Your Money

Let us tell you there are numerous rules of thumb about emergency funds. While some say to save at least 3 months of living expenses in a liquid account, others suggest 6 months. Whatsoever, an emergency fund is an essential factor to consider, even after this pandemic. 

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