Racing to Retirement?
September 14, 2020
If you had been carefully planning your retirement and thought that you had a few more years to accumulate a nest egg before you officially called it quits, you may be prompted during the COVID-19 pandemic, to shift gears and reevaluate your options.
Employees worldwide are enduring furloughs pending a rebound in the economy, permanent layoffs because of drastic downturns at their workplaces, or have decided not to return to a work environment that may expose them to COVID-19. If one of these, or another reason, has spurred you to consider or plan to retire sooner than you had anticipated, make sure your retirement income strategy is right for your current and future financial situation. You may want to consult a financial planner who can help you project and protect your retirement benefits while you decide when to retire.
Retirees with limited financial resources face numerous risks, including out-living their money, investment losses, unexpected health expenses, the unforeseen needs of family members, and even reductions in retirement benefits. Some workers, including teachers, restaurateurs, and healthcare providers, whose professions require close contact with others, have started withdrawing from the workforce earlier than they had planned because of challenges and concerns resulting from the COVID-19 pandemic.
The pandemic has hit older workers hard. The unemployment rate among Americans age 55 and up reached a staggering 13.6 percent in April, up from just 2.6 percent in January, according to the U.S. Bureau of Labor Statistics. As of August, the percentage had gone down to 7.7 percent but other data show that one in five Americans in their 60s has lost his job or has been furloughed due to COVID-19, according to the July 2020 Retirement Confidence Index by the financial technology company SimplyWise. Overall, 15 percent of Americans are now considering claiming Social Security benefits earlier than they had anticipated. One in five respondents who was laid off during the coronavirus pandemic is now planning to retire early.
If you can identify with these staggering statistics, take a deep breath and review the following suggestions to guide you to the finish line for a financially successful retirement.
Examine Expenses and Downsize
For many employees, the COVID-19 pandemic has revealed how fragile their financial security is. A recent survey from the National Endowment for Financial Education found that nearly 9 in 10 (88 percent) Americans said that the COVID-19 crisis is causing stress on their personal finances. Americans who are not yet retired but whose finances have been impacted by the pandemic can use this time to review their expenses and reduce unnecessary spending. You’ll need to take inventory of your entire financial situation and determine how much cash will see you through retirement.
Take Stock of Resources and Make Adjustments
Evaluate what resources you have available. Make any necessary adjustments to savings and portfolio asset allocations, including your 401(k) or 403(b) accounts, pension plans from former or current employers, IRA accounts, and annuities as well as Social Security benefits based on your employment and age. For those who are eligible but not yet drawing Social Security payments, this is a good time to consider how to maximize your benefits.
Decide how much money you want to keep in stocks vs. bonds, based on your risk tolerance and financial goals. Keep in mind, most people need to maintain a stake in stocks, even in retirement, to get the long-term growth they need. But for those who prefer a more cautious strategy—and for older investors who have already amassed enough savings to afford a comfortable retirement—it may make sense to reduce the percentage you invest in stocks and increase your fixed-income holdings.
Rethink Withdrawal Rate
People in or nearing retirement need to review their withdrawal rate, and the pandemic has given new urgency to designing a safe withdrawal strategy. The 4 percent rule is the traditional rule of thumb for retirement withdrawals. You take out 4 percent of your portfolio in the first year, then increase that amount by the inflation rate in subsequent years. Studies show that this strategy can minimize your risk of running out of money over a 30-year retirement.
The article, “Don’t Let the Coronavirus Derail Your Retirement: How to Get Back on Track If Your 401(k) Has Taken a Hit,” published in the May 2020 issue of Consumer Reports advises retirees to consider skipping their required minimum distributions from their 401(k) plans and individual retirement accounts that is permitted this year under the coronavirus relief package. If you can forgo those withdrawals, your portfolio will have more time to recover from losses.
Consider Taking Social Security Early
The longer you wait to claim Social Security benefits, the larger the payout you’re likely to receive. If you are at the full retirement age between 65 and 67 years old, you can claim benefits about 30 percent higher than if you take them early starting at age 62. By waiting until you’re 70 years old, the benefit amount would be another 32 percent higher than the amount you’d get at full retirement age.
But waiting isn’t always the best option and individuals need to be aware of how claiming benefits at different ages will impact their overall retirement strategies.
Evaluate Employment Opportunities
If you figure out that you don’t have enough currently saved for a comfortable retirement, consider remaining at or returning to work–even in a part-time position. Earning additional income and accumulating money in your retirement savings account will be beneficial if you can delay retirement and avoid unemployment. One of the most effective measures for protecting your finances is to amass an emergency fund that can cover three to six months of expenses—perhaps as much as a year if your job isn’t secure. That money should be kept in a safe, easily accessible account, which will spare you from having to dip into retirement funds or rely solely on credit cards for unexpected bills.
Once you have come to terms with a retirement date and a vision of a secure financial future, store copies of your decisions for portfolio changes, Social Security formulas, records of all of your 401 (k) or 403(b) accounts, pension plans, IRA accounts, annuities, and other investments at InsureYouKnow.org.
Happy Birthday America!
June 30, 2019
Happy Independence Day America. As the red, white and blue combinations emerge in our clothing and décor, marketing and sales galore treat our senses – It is a time for enjoyment in America. Fireworks, BBQ, Baseball, time with the family and friends – and for most of us – time off from work and the normal routine. Who doesn’t enjoy a birthday and time to celebrate, a time to kick-back and accept that the summer season is here – heat and all.
The 4th of July celebrations have been diversifying since the first official celebrations in 1777, when “Philadelphians remembered the 4th of July. Bells were rung, guns fired, candles lighted, and firecrackers set off.” Though we have introduced the summertime aspects of sports and outdoor foods to our traditions the fireworks remain!
Here are some facts about America that we can introduce into our own traditions:
- There are 126x more people in the United States than in 1776. There is a reason that the American population continues to grow. With the 2020 Census coming up – we’ll be able to have a more accurate count of who and where everyone lives. “In July 1776 there were an estimated 2.5 million people living in the Colonial United States. Currently there are approximately 316 million Americans.” Do you have such colossal growth or debt during your lifetime that you haven’t accounted for? Looking at all our accounts, the 401k accounts from our first place of employment, and checking with family members to see if there are any assets lurking out there. There may be more than you know.
- We started celebrating the 4th of July holiday 100 years after the Declaration was signed. If we waited that long to formalize the important things in our lives we would be in trouble. Power of Attorney, Wills, Healthcare directives, your birthday wish list, the Bucket List, – the family and friends may know what your wishes are – but have they changed over the years. Document and act upon the things that are important to you – before 100 years pass. Americans were so busy creating their young nation that they forgot to enjoy and recognize national holidays until 1870.
- We have a Declaration of Independence How many of us have read the declaration of Independence since we left school? There are lot of words, and a lot of fine print – and it’s the fine print that defines the why – why our military continues to fight for America. The British rules and regulations were stifling the growth of America, and the 13 states came together to put together a document to publicly declare freedom The full Declaration of Independence can be found in many books and the original lies in National Archives in Washington DC. Where is the history of your life, your family and the why?
As a proud American, with access to life, liberty and justice, the access we have to continue to keep our belongings safe is easy. With InsureYouKnow.org – an American based-company –our online information is safe. The ability to access documents, and files remotely – or from the comforts of your own home can be taken for granted, just like so many other things. An annual plan is also available for cost-savings.