The COVID-19 pandemic has spurred record unemployment, stock market volatility and a recession. After more than a decade of financial stability on Wall Street, many people are now feeling anxious about their financial futures. In fact, new numbers show 62% of Americans are more concerned about their retirement today (opens in new tab) than a year ago.
If you didn’t have a retirement plan in place before the pandemic hit, now is the time to meet with a financial adviser to create one. If you have a plan in place, revisit it right now to ensure you’re still on track to meet your goals. If not, here are four things you can do to get back on track:
Work Longer
Working past your retirement age is one way to boost your savings and delay dipping into your retirement accounts. Even if you work part-time, or you and your spouse stagger your retirement dates so one of you continues working longer than the other, the extra income will help fill any savings gaps. If your job has health benefits, continuing to work can help fill your gap in coverage. If you’re 65 and on Medicare while working, you may still have to pay some health care expenses, because Medicare doesn’t cover everything. If you have health insurance through your employer, you may be able to enroll in coverage there and utilize Medicare to bring down your costs.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of Kiplinger’s expert advice - straight to your e-mail.
Reassess Your Risk
Our longest bull market on record came to a halt in mid-March when stocks tumbled 30% (opens in new tab), which was the fastest drop of that size ever seen on Wall Street. If you took a look at your account balances in the first quarter of 2020 and lost more money than you were comfortable with, your risk isn’t aligned with your tolerance and now is the time to reassess and rebalance.
To determine what percentage of your money you want to expose to risk, keep your eye on your long-term goals. When reinvesting or rebalancing portfolios, many of the moves we make depend on a client’s current risk tolerance and when they plan to use their money in retirement. Many investors who manage their portfolios on their own don’t rebalance regularly. Consider the rule of 100 when it comes to risk in your portfolio: Take your age and subtract it from 100, and that’s the maximum percentage of your investments that should be exposed to risk. For example, if you’re 60 years old, only 40% of your portfolio should be exposed to risk.
Review Your Goals
If you’ve found yourself unexpectedly unemployed, cutting back on your retirement contributions or even rethinking how you want to spend your golden years, take time now to review your goals. Your retirement plan is built around your goals. Your income plan and the date at which you want to retire also play a role in setting and achieving your retirement goals.
When thinking about how much money you might need in retirement to meet your goals, divide retirement into three phases:
- During early retirement, your spending will likely be higher as you actively enjoy your free time. Depending on health, this phase is usually ages 55 to 75.
- Spending slows down a bit in the second phase of retirement. Due to health or age, you will likely stay home more and travel less. This phase usually spans the 70 to 85 age range.
- In your third phase of retirement, health care costs might replace what you used to spend on travel and entertainment. Depending on your health, spending might increase a bit from the second phase. This is generally true for those 80 and older.
Meet with a Financial Adviser
Your retirement security goes beyond how much you have tucked away in your savings; it also relies on a comprehensive plan that will help get you to and through your golden years. If you’re preparing for retirement and find yourself in an uncertain financial situation, meet with a financial adviser who can help you put together a plan that will outline your retirement goals and the path you need to take to meet them. It will take into account your income needs through different phases of retirement and will outline withdrawal strategies to meet those needs.
-
6 Ways a DAF Can Make Your Year-End Giving Better Than EverGiving appreciated assets instead of cash could be the most tax-smart move you can make with a donor-advised fund, but wait, there's more…
-
Life Insurance Strategies to Consider When You Own a Family Business
Not only can life insurance replace lost income, but it can help with estate taxes and provide a sense of fairness for family members who don’t participate in the business.
-
Short-Term Investments to Protect Against Inflation and Market Volatility
Rates on Series I savings bonds, T-bills and fixed annuities are all above historical averages and could serve investors well during turbulent times like these.
-
What’s the Difference Between Average and Actual Rate of Return?
An average rate of return can mask losses over time, so what investors really want to keep an eye on is the actual rate of return.
-
Can You Build a Retirement Income Plan With Both Risk and Reliability?
Two strategies for making retirement savings last — probability-based income planning and guaranteed income planning — can help ensure you have what you need in your golden years, but which is right for you?
-
5 Financial Wellness Tips to Help Weather the Winter
You can regain some control over today’s money pressures by exploring your employer's financial support options and benefits, making plans to save and taking other simple actions.
-
10 Common Investing Mistakes That Can Easily Be Avoided
Some of these missteps might be a given when you’re starting out. A financial adviser offers tips on how to stay on track for years to come.
-
I'm a New Widow. Who Are the Experts I Should Consult?
A support network of experts who can help a new widow can be just as important as your personal support network at such a difficult time.
