The pandemic has had a big impact on saving for retirement, but things are starting to change now. With the economy rebounding, it’s a good time to get your retirement back on track with Agemy Financial.
Since the pandemic started 16 months ago, hundreds of thousands of Americans have lost their lives, millions have lost their jobs and practically every family in America has endured online classes or work from home for months on end. We’ve changed how we work, how we shop and how we socialize.
In addition to everything else, the COVID-19 pandemic may have put a real dent in your retirement savings progress by hindering those who hadn’t started saving for retirement, the number of workers taking withdrawals from their 401(k)s last year jumped, and some companies cut their 401(k) matching contributions.
Regardless, it was probably the right move at the time, and you did what you had to do. But things are starting to change now. With the economy rebounding, it’s a good time to get your retirement back on track. To assist with that effort, here are three ways you can shore up your retirement plan for a financially secure future.
1. Reassess your plan
If you're currently working and saving for retirement through a 401(k) or similar plan, it's smart to stay the course, even if your employer, like many, temporarily suspended its match as a result of the pandemic. According to a November 2020 survey by the Plan Sponsor Council of America, nearly 95% of employers indicated they had not changed their retirement plans. That’s a much better outcome than what went down during and after the Great Recession.
If you had to take a 401(k) loan or withdrawal, empty an IRA out or dig into your Roth, there are ways you can get back on track without it greatly affecting your retirement goals. The first thing you need to do is take a look at where you are today and where you need to be in order to accomplish your goals.
Adding a little extra each month above your normal contribution and setting a calendar reminder every couple of months to nudge your contribution a bit higher are great ways to ramp up on saving opportunities. Big change is hard, but commit to small incremental changes to get your plan back on track. Consult with a financial advisor or planner to conduct a retirement income analysis, the results can guide you on the right path.
2. Revisit your investment portfolio
The COVID-19 outbreak has put tremendous pressure on stock prices, prompting some investors to blindly and indiscriminately sell positions at a time when the entire market is trending lower. As the world adjusts to a new normal after coronavirus, it’s time for associations to consider whether they need a new normal for their investment portfolios. It's important to ensure your asset allocation remains appropriate for your goals, risk tolerance, time horizon, or length of time you have to invest before reaching retirement, and rebalance as necessary.
When stock prices are trending lower, some investors can second-guess their risk tolerance. But periods of market volatility can be the worst times to consider portfolio decisions. A retirement strategy formed with a financial professional has market volatility factored in. As you continue your relationship with that professional, they will also be at your side to make any adjustments and help you make any necessary decisions along the way. Their goal is to help you pursue your goals.
3. Having a back up plan
As always, it's important to have a backup plan. Many advisors suggest doing so to protect yourself from unexpected events, like say, a pandemic. Pulling from retirement accounts should be your last resort. A backup plan can combat the need to access funds earmarked for retirement during future financial crises.
Establishing an emergency fund is critical — most Americans cannot cover an unexpected expense of $1,000. Having savings set aside for emergencies means you don’t need to tap your retirement accounts for financial surprises. Most advisors suggest three to six months of living expenses. Others suggest you can start smaller, with a goal of building your emergency fund up to $500, and add to it over time.
Final Thoughts
While the pandemic has changed our outlook on a lot of things, one thing has remained the same: It's never too late to start saving for retirement. And while COVID has thrown a curveball to so many Americans who have worked their entire lives to retire comfortably, we are a resilient people - and now is a good time to regroup, reassess your retirement situation and establish a plan based on your goals and your needs.
No matter what your view, there are a number of questions and concerns that should be addressed to help you prepare for retirement living. For more information on how you can best prepare for retirement, contact the trusted financial advisors at Agemy Financial here today.