The last two years have made it exponentially harder to stick to those retirement savings goals. As a result, many Americans dipped into the largest chunk of money they have — their workplace retirement savings accounts. Despite the latest retirement study data, it's not too late to get back on track, and you don't need a miracle to get you there!
The Covid pandemic has taken a heavy toll on Americans and their retirement security. Throughout living in a time where everything was uncertain, many lost their jobs. A majority of us had to dip into their savings and retirement accounts just to get by. A recent study found that saving for retirement has fallen behind due to job loss, unexpected expenses, giving financial help to family and friends or dealing with a health emergency.
The top concern is how significant increases in government spending to get the economy back on track will lead to decreases in Social Security benefits. In this article we will do a deep analysis of the Natixis Global Retirement Index study and the things you need to do to prepare for retirement.
Key findings of the study included:
- 41% of respondents, including 46% of Generation Y, 45% of Generation X and 30% of Baby Boomers, believe they will need a miracle to be able to retire securely;
- 73% recognize it is their responsibility to fund retirement versus relying on a pension or Social Security, 42% say it will be difficult to make ends meet if Social Security benefits are lower than expected, 31% of those with a net worth of $1 million or more;
- Nearly six in 10 (59%) accept that they will have to keep working longer, 36% believe they will never have enough money to retire, this includes: 51% of Generation Y, 48% of Generation X and one in five Baby Boomers (20%)
- Two-thirds (68%) see long-term inflation as a big risk to their retirement security, while 64% worry that healthcare costs will consume savings.
- Half (50%) are concerned that low interest rates will make it harder to generate income in retirement.
As you can see, the pandemic unfortunately took a toll on many aspects of life. According to the Fidelity Investments' 2021 State of Retirement Planning Study, more than eight out of 10 Americans (82%) indicate what's taken place this past year has impacted their retirement plans, with one-third estimating it will take 2-3 years to get back on track, due to factors such as job loss or retirement withdrawals. The good news is that the US Government is looking ahead to what's to come. Stimulus packages helped stimulate the economy and provide relief for many families. It also cut or froze interest rates, and flooded the capital markets with unprecedented liquidity.
While these policies brought relief to people, the long-term risk is still high for retirees who are vulnerable to low yields and face challenges of generating a sustainable income in retirement. Fortunately for today’s policy makers, low interest rates make debt a little bit more manageable. Still, there are levels of public debt and the need for budgetary solutions that will force tough decisions about government spending, including public retirement benefits, raising taxes, raising the retirement age, and cutting benefits.
Getting Back on Track
There's further good news: you should not need a miracle to right the wrongs the pandemic threw at us.
Even though everybody knows to expect the unexpected, no one could have predicted how the events of the past 20+ months would change the world. As a result, many people had to shift their approach toward financial planning and retirement savings and are now looking for ways to get back on track. To assist with that effort, try these actionable tips to help your retirement funds rebound:
- Start now: Even if you are only able to contribute a small amount a month into a retirement account, that's still better than contributing nothing, thanks to the power of compounding interest. The sooner you start to save again the better.
- Don't shy away from investing: It's important not to become shy about investing while bulking up your savings. Remember, investing remains a critical part of your overall financial planning strategy.
- Open a HSA (Health Savings Account): HSAs can be a valuable retirement funding vehicle and are considered 'triple tax advantaged' accounts and as such have benefits that may outweigh contributions to other types of retirement plans.
- Get smart with your cash: Eliminating big debt and building back up your emergency savings will help protect you from future financial downfalls. COVID-19 (or whatever else comes along) then becomes a matter of statement pain, not long term financial pain.
- Seek professional help: Getting back on track is a matter of setting goals, creating a plan to achieve them, and sticking to that plan. Speaking with an experienced financial advisor will help you create a solid foundation to help to withstand financial volatility.
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.