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Here’s How COVID-19 Has Impacted Retirement Planning and How You Can Adjust

Here’s How COVID-19 Has Impacted Retirement Planning and How You Can Adjust

October 21, 2021

We are two years into a pandemic we hoped would not last long, and Americans continue to face challenges presented by COVID-19. As variants have mutated, so have its life-changing impacts on our health, wealth, and well-being. To top it off, Americans have experienced additional concerns in how COVID-19 has impacted retirement planning.

How COVID-19 Has Impacted Retirement Planning

Americans fear they are more financially unprepared than ever to retire.

An article published by the National Institute for Retirement Security revealed that more than half of Americans have fears of enjoying financial security in retirement because of COVID-19. With inflation on the rise and the challenges many small businesses and corporations face during this national health crisis, saving for retirement is a daunting task. Unfortunately, an increasing number of Americans are preparing to work well into retirement age to offset additional, unexpected financial burdens presented by the pandemic.

Many Baby Boomers have retired early (and not necessarily by choice).

On the other hand, last year Pew Research Center reported that in the 3Q of 2020, 3.2 million more baby boomers retired early than in the 3Q of 2019. While some of these individuals may have reached a secure financial place to easily retire, many may have had to exit the workforce due to job losses, health concerns, or both.

Other Americans are retiring by choice.

Boomers aren’t the only demographic affected by the pandemic. Other Americans have simply lost jobs due to employers downsizing, initial furloughs facilitated by the pandemic, the inability to pay for childcare due to loss of income, and health concerns regarding themselves or loved ones. An, an astounding number of employees have refused to go back to work in their prior industries simply because—after having considerable time off or working from home—have no desire to return to work under less-than-desirable conditions.

So, in the aftermath of the initial start of the pandemic, more people are considering retiring early than ever before. Fox News reported on a survey conducted by Hearts and Wallets that found in 2020, compared to years prior, households of those under 54 years of age comprised 13 percent of those who want to retire early. In fact, 44 percent of middle-aged households (ages 55-64) think of themselves as either pre-retirees or post-retirees. This is significant, especially when the average American household hasn’t saved enough to fund the retirement life they desire.

How to Find a New Way to Manage and Adjust Your Retirement Planning and Saving

Any way you look at it, the pandemic is forcing Americans and wealth management advisors to reevaluate and adjust financial planning to adapt to the ways COVID-19 has impacted retirement planning. If you want to retire early, on time, or at all—it’s critical to evaluate your new financial circumstances, anticipate future ups and downs, and create innovative but sensible ways to save.

Plan your exit strategy carefully.

If you have dreams to retire early, there are a few important considerations you must be aware of before you take the plunge. You and your financial advisor can discuss all of your options unique to your situation, but below are a few hot spots you must know.

Social Security benefits: Understand the ramifications of taking Social Security benefits before you reach 65. For example, if you take benefits at 62, you face the loss of approximately 25 percent the benefits you’d get if you waited until retirement age. Additionally, deferring benefits up to the age of 70 can potentially gain you an extra 8 percent a year by the way of deferred retirement credits.

Insurance alternatives before Medicare kicks in: This is crucial if you retire early for any reason. Medicare Parts A and B don’t kick in until you are 65. Explore your options for health care before Medicare is available to you—and make this expense part of your budget.

Factor in inflation: The pandemic has caused an unprecedented rise in inflation during this time. It’s important to consider this in your retirement budget. Additionally, even though Social Security’s COLA is forecasted to rise quite a bit due to the rise in inflation—you’ll still have to balance those extra dollars against the increasing costs of goods and services.

Consider a part-time job: Many retired individuals and couples who retire together choose to work part-time in retirement. This can help you create a financial safety net, as well as keep you socially active and mentally sharp.

Find new ways to save: This may be easier than you think in the middle of a pandemic. In fact, if you’re now working from home instead of commuting, you’re already saving on gas. If you used to grab lunch from an eatery near your office, those are additional dollars you can save. Making your own meals at home costs much less than your typical, pre-pandemic restaurant expenses. And these extra funds can add up.

Along with retirement savings, plan to build your emergency fund back up, dollar by dollar. This is critical in a time when you may face unexpected medical expenses or the loss of your job. If you’re unable to work from home, take a bag lunch instead of ordering delivery from your favorite deli. If you traveled a lot for work before the pandemic, take those extra dollars you would have spent on those trips and sock them away in your retirement account and emergency fund.

Additionally, you can cancel subscriptions for services (massages, gyms), streaming services you don’t use, or cancel those that feature the same types of shows. Alternatively, cancel cable and pay much less for streaming only the programs you desire to watch. Refinance your mortgage to take advantage of lower interest rates. Trade your dry-cleaning clothes for alternatives you can wash and iron yourself.

Final Thoughts in Moving Forward with Your Retirement Planning

Don’t let the how COVID-19 has impacted retirement planning stop you from continuing to live out your golden years the way you dream. The above tips are helpful to establish and augment any savings strategy. But they are particularly important if you want financial security in retirement. There are a great number of different strategies to help you save enough to retire. You must find the ones that work for you, put them into practice, incorporate your strategy into your daily life, and make adjustments any time your situation fluctuates one way or another.