The coronavirus pandemic has had a powerful effect on our society, and millions of Americans are feeling the effects. Tens of millions of people are out of work due to COVID-19, and the virus may also cause many older adults to alter their retirement plans.
Money is tight for many households right now, and the majority of Americans are finding it hard to save. In fact, around 61% of U.S. adults say the COVID-19 pandemic has negatively affected their ability to save and invest for the future, according to a survey from Country Financial.
Saving for retirement may be at the bottom of your priority list right now, but it's still important to be thinking about your senior years -- especially if your retirement age is quickly approaching. Fortunately, there are a few things you can do if COVID-19 has affected your retirement strategy.
COVID-19 is making it harder to retire
Whether you've lost your source of income or watched your retirement savings plummet over the last couple of months, the coronavirus pandemic is making it more challenging for older adults to afford retirement.
The average 401(k) balance fell by nearly 20% in the first quarter of the year, according to a report from Fidelity Investments. If you're still decades away from retirement, your savings should bounce back when the economy recovers -- so don't panic about your account balance right now. You may need to save a little more down the road, but the stock market does always manage to recover eventually.
If you're nearing retirement age, though, you may not have decades to wait it out. In this case, it may be wise to delay retirement by a few years, if you can swing it. This will give your savings extra time to recover, and if you can delay claiming Social Security benefits as well, that can also boost your retirement income.
Exactly how long you'll need to delay retirement is uncertain. Nearly half of Americans expect the economy to recover in around one to two years, according to the Country Financial survey, but nobody knows exactly how long this pandemic will last. So you may need to be flexible with your plans right now as the future unfolds.
What to do if you've lost your job
Not everyone is fortunate enough to be able to decide when they want to retire, and millions of older workers have lost their jobs recently. The unemployment rate among U.S. adults age 55 and older jumped from 3.3% in March to 13.6% in April, according to the Bureau of Labor Statistics, and it could be difficult to find another job if you're laid off right now. For that reason, many older workers may simply choose to retire earlier than they'd planned.
Early retirement may sound good in theory, but it can potentially be dangerous. You may not have as much saved for retirement as you'd hoped (especially if your investments have taken a hit recently), and your money also has to last longer than if you'd retired later. However, this may be your only option if you lose your job later in life.
If you do end up retiring early, try your best to be conservative with your retirement fund withdrawals. Withdrawing your savings during a recession can be costly because you're selling your investments when stock prices are lower, essentially locking in your losses. The more money you're able to leave in your retirement account, the more that cash will continue to grow -- and the longer your savings will last. This may mean you'll need to consider claiming Social Security benefits early to limit your retirement account withdrawals, and although that will result in smaller checks each month, it might be a smart move for the long term.
Whether you're nearing retirement age or still have plenty of time left to save, the coronavirus pandemic has likely affected your retirement strategy in some way. By being willing to adjust your plans, however, you can ensure you're as prepared as possible for whatever the future may hold.