Americans of all ages have to contend with financial hardship because of the coronavirus because of the great need it has led to record unemployment, an economic recession, and unusual stock market volatility.
With the virus having such a large economic impact, it is not surprising that millions of Americans believe the financial effects will be long-term. Unfortunately, both future and present retirees have indicated that their pensions can be affected in some profoundly negative ways.
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How coronavirus does pension security
According to a survey by the website Personal Capital, there has been a large general decrease in the number of people who feel financially ready for retirement.
Although 63% of respondents indicated that they felt financially ready to retire before the pandemic, just 52% now feel that they will be in a good financial position when it comes time to leave the working world.
For most people who are not yet retired, this growing concern about retirement eligibility can be largely driven by concerns about how COVID-19 will affect their savings. In fact, close to 90% of Americans in the survey are worried about how their nest egg will catch up in the crisis as unemployment claims increase and concerns about another possible stock crash.
Today’s retirees are also worried, with 37% of Americans leaving the workforce already indicating that they have experienced financial hardship due to the virus. More than a quarter of those surveyed are so concerned about the impact of COVID-19 on their finances that they believe there is an increased chance that they will actually need to work back.
What should you do to improve your retirement?
If you are still a long way from retirement and are worried about your honesty, there are enough to make sure the virus does not affect your work to stop when you are ready.
First, make sure you have the appropriate asset allocation. Far too many Americans allowed themselves to invest in equities as the market went up, and thus experienced large losses in March (which may have driven some of those fears about pension savings balances). The market has restored almost everything it has lost, giving you a second chance to solve the problem by rebalancing your portfolio so that you are exposed to an appropriate level of risk given your age.
Once you have done that, if you just stay the course and continue to contribute to your retirement accounts and invest in companies you believe in (like index funds that follow the market), the coronavirus should ideally have no long-term impact on your portfolio. While this event is unusual, come and go recessions and the market is always recovering.
Staying the course can be a challenge if you are out of work and currently unable to continue with pension account contributions. But you can overcome it by increasing contributions after you return to work to compensate for lost time. If you have cut your budget due to a reduction in income, try living at that lower level of spending for a few months while you retire on pension contributions.
For those who are already retired and worried about the impact of the virus, there is some cause for concern. COVID-19 may follow next year a slight increase in Social Security, if not at all. And it may make the day as Social Security cuts necessitate because of the program’s trust fund. Some retirees may also not have fully recovered all of their March investment loss, even though the market as a whole has run out.
However, there are many options. For seniors recovering from market losses, it is especially important to maintain the proper allocation of assets and have several years of living expenses in liquid cash so that you do not have to sell investments during a downturn in case the market crashes again. You can also look at opportunities to make budget cuts in light of the possibility that Social Security benefits continue to be lost with purchasing power without COLA – or in the event of a major benefit cut if legislators do not act to address the financial woes of the program to repair.
Do not let COVID-19 interest you with your retirement plans
If you’re one of the millions of Americans who have lost confidence in their readiness for retirement, then do not give up hope. You can get back on track by increasing your retirement investments as soon as you can pay them off, making sure your portfolio is properly balanced, and perhaps making some adjustments to your budget. It will undoubtedly take effort, but being ready for retirement is worth it.
