COVID-19 has completely shifted the economic/financial landscape for many Americans this past year. Unexpectedly, many were unable to work due to quarantine and illness. This has many Americans worried about their future, especially ones nearing retirement.
COVID-19 has wreaked havoc on retirement plans. It is hard on those who lost their job and access to retirement plans like 401(k)s. Employers have been reported to have instituted pay cuts limiting workers’ ability to contribute to their plan. Others have reduced or eliminated their contributions. Many employees may have to use their retirement savings to keep going. Access to the funds may help for now, but it will be noticeable in later years.
In addition to delivering financial unrest, COVID-19 has exposed inadequacies in the nursing home infrastructure and system. Home care may become a more preferred retirement plan. Fewer nursing homes are expected to exist with enhanced quality, and more resources are being developed to help people age at home. More nursing homes are expected to close as the government raises regulatory standards on nursing homes. Experts believe that more people will focus on aging at home.
Community-based programs, such as the Program of All-Inclusive Care for the Elderly, are reported to expand. The Program of All-Inclusive Care for the Elderly is a Medicare-sponsored service that helps people with medical services, daycare, home care, and transportation. The program costs Medicare and Medicaid about 2000 less per person a month versus nursing homes.
Our economic environment has shifted, and there is no better time than the present to be considering long-term financial plans. People who were considering retiring in the next few years may need to re-evaluate their options. Here are seven tips on how to prepare for retirement during COVID-19.
Not sure how to prepare for your upcoming transition into retirement? Bell & Associates Consulting Firm is here to make the transition smooth. Contact us today!
1.Do Not Make Rash Financial Decisions
Uncertain times can leave many anxious about what steps to take next. Breathe and give yourself time to consider all your potential options. You do not want to make an irreversible life-changing decision without knowing all the avenues you can take. For instance, selling off stock at a loss may seem like a safe move, but history dictates that the market often recovers.
2. Find An Accountant/Financial Advisor
Long term financial decisions can be difficult to make alone. Find yourself a reliable accountant. They can help assess your goals and get you on the track that you need to be on.
3. Re-Examine Your Financial Portfolio
A reliable accountant/financial advisor will help you make stable income investments to help offset retirement expenses.
4. Adjust Your Lifestyle
It may seem obvious, but any minimizing of expenses will help. Examples of downsizing include getting a smaller home, not buying the newest car or smartphone, or reducing food costs by not eating out as much. Other great examples are avoiding high-interest credit card debt, mortgages, or vehicle loans. Work to get these expenses to a minimum and avoid adding new ones.
5. Contribute More To Retirement Plans
Consider contributing to a Registered Retirement Savings Plan (RRSP) that can lower taxable income or a Tax-Free Savings Account (TFSA), where funds can grow without tax consequences.
6. Consider Other Sources Of Income
Contributing to a healthy pension will be beneficial during retirement. If you’ve been laid off, your pension or RRSP contributions could be lower. Note all your sources of income (pension plans, retirement accounts). Your spouses’ pension and retirement plan should be evaluated as well. Consider employment insurance payments and government relief. You could also consider taking on odd jobs or monetizing a hobby to bring in funds.
7. Consider Your Obligations
Consider family. Maybe they will need some assistance due to hard times. As mentioned above, aging at home may be a preferred/safer method going into the future. Will you have the funds to take care of yourself or a loved one at home?
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Final Word
It is never too early to start planning for retirement. There are so many decisions associated with work and aging that often go overlooked in common conversation. These topics need to be discussed within the family so that everyone is up-to-speed with their obligations and potential future obligations.
References
https://www.moneytalkgo.com/covid-19-review-your-financial-plan-when-retiring-during-a-pandemic/
https://www.wsj.com/articles/how-covid-19-will-change-aging-and-retirement-11605452401
