The coronavirus pandemic has not only brought health concerns, it's also forcing many Americans to take a hard look at their financial future. A new study found 68 million workers say COVID-19 has caused them to reconsider their retirement timeline. Should you retire early or delay retirement as long as you can?
Local financial professional Scott Braddock from Scott Braddock Financial joins us to talk about how the coronavirus is impacting people’s finances and offer advice to help you know when the time is right.
Unemployment claims hit a record high and the U.S. fell into a recession in the first quarter of this year. This employment uncertainty coupled with stock market volatility has many Americans who are approaching retirement worried. New numbers show that 62% of Americans are more concerned about their retirement today compared to a year ago. Most of their reasons are financial. They’ve either had to dip into savings or their retirement funds have lost value and there’s greater concern about how much money they will need in retirement.
The biggest things to do to get your retirement back on track:
Reassess Your Risk - If you took a look at your account balances when the market dropped in March and April and you lost more money than you’re comfortable with, your risk isn’t aligned with your tolerance and now is the time to reassess and rebalance. Your investments should be diversified and have an appropriate risk for your age and how close you are to retirement. A good guideline is the Rule of 100. Take your age and subtract it from 100 - that’s how much of your portfolio should be invested in stocks. For example, if you’re 60 years old, only 40% of your portfolio should be exposed to risk.
Review Your Goals - In all likelihood, the coronavirus has changed your life in some way, shape or form. If you found yourself unexpectedly unemployed or having to cut back on your retirement contributions, take time now to review your goals.
When thinking about how much money you might need in retirement to meet your goals, I recommend dividing retirement into three phases.
Phase 1 is early retirement. Your spending will likely be higher as you enjoy your free time.
Phase 2 is middle retirement, and due to health or age, you will likely stay home more and spend less.
- Phase 3 is late retirement, and your spending might increase a bit due to health care costs.
If you need help crunching the numbers, Scott Braddock has a retirement calculator on his website. You can find it on scottbraddockfinancial.com.
Meet with a Financial Professional - The majority of working Americans were not on track with their retirement savings before the pandemic began, and COVID-19 has thrown them even farther off course. One of the most important things a pre-retiree can do is learn what it takes to build a comprehensive financial plan. Braddocks recommends working with an expert. A financial professional can help you put a plan in place so you can prepare for and withstand difficult economic times. Braddock is a firm believer that if you’re going to make any big decision in life, you need a good coach. The first step to a worry-free retirement is to have a clear and defined vision. He wants to understand your goals and concerns to determine your financial DNA.
While the thought of working longer than expected may be disheartening, it can boost your retirement income. You will continue building your savings, while also delaying dipping into your retirement accounts.Your Social Security benefits increase for every year you wait to claim beyond your full retirement age. It’s important to have a plan for retirement and a strategy for tapping into your benefits. Sit down with a financial professional to determine what’s best for your situation. Working longer also helps you maintain health insurance. You are not eligible for Medicare coverage until you turn 65. Continuing to work a job with health benefits can help fill your gap in coverage.
