10 Ways Coronavirus Might Alter Your Retirement Plans

COVID-19 has wreaked havoc on our society, affecting millions of Americans' health, finances, and livelihoods. Tens of millions of U.S. adults have filed for unemployment benefits, and many investors have watched their retirement savings plummet over a matter of weeks. If you're nearing retirement age, the coronavirus pandemic may be concerning for a whole host of reasons. And there are several ways COVID-19 could affect your retirement plans.

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Planning for retirement is already a challenge, but a global pandemic can make it even more difficult to prepare for your senior years. If your retirement investments have taken a serious hit over the last few months, you might need to consider delaying retirement by a year or two to give your savings additional time to recover. Nobody knows exactly how long it will take for the economy to bounce back, but around 44% of Americans think it will take between one and two years, according to a recent survey from Country Financial. If you can hold off on retirement for at least that long, your savings may be in much better shape when you do finally retire.

ALSO READ: This Percentage of Americans May Be Postponing Retirement Due to COVID-19

On the other hand, you may not have a choice in when you retire. Older adults are losing their jobs at an alarming rate, with the unemployment rate among workers age 55 and older jumping from 3.3% in March to 13.6% in April, according to data from the Bureau of Labor Statistics. If you're laid off late in life, you may be forced into an early retirement whether you're ready for it or not. Flexibility is key right now, so do your best to keep saving as much as you can just in case retirement comes sooner than you'd planned.

It's tempting to start panicking when the stock market takes a turn for the worse, but remember that you don't actually lose any money on your investments until you sell. This is good news if you still have a few years until retirement, because you can keep your money parked where it is and ride out this storm. But if you're planning on withdrawing your investments in the near future, you could potentially lose money if you withdraw when the market is down. For that reason, it's a good idea to hold off on making any withdrawals, if possible, until the economy recovers.

Unless you have loads of cash stashed in your retirement fund, you'll likely need to lean on Social Security benefits for at least a portion of your retirement income. If you're forced into an early retirement, you may also need to claim benefits as early as possible to help make ends meet. On the other side of the coin, if you're able to delay retirement, you might also choose to hold off on claiming benefits by a few years. The age you begin claiming benefits affects how much you receive each month, so this decision will impact your retirement income for the rest of your life.

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Not only could your benefits be reduced if you claim early, but there's also a chance there could be sweeping benefit cuts in the future. The Social Security Administration (SSA) uses the money from payroll taxes to fund benefits, but right now there's not enough money coming in from taxes to cover current retirees' benefits. The SSA has dipped into its trust funds to bridge the gap, but these funds are expected to run dry by 2034, according to the SSA Board of Trustees' latest estimates. When that happens, the SSA will have to rely on payroll taxes to fund benefits, and those taxes are only expected to be enough to cover around 76% of projected benefits. COVID-19 could also make matters worse because so many people are out of work and not paying payroll taxes. The longer these workers are unemployed, the sooner the SSA may need to start cutting benefits.

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Many employers are struggling financially due to the coronavirus pandemic, and one cost-saving measure some companies have taken is to temporarily suspend matching 401(k) contributions. Around 16% of employers have suspended matching contributions, according to a survey from the Plan Sponsor Council of America, and around 7% of organizations have reduced or suspended non-matching contributions as well. If you're banking on those employer contributions as you're preparing for retirement, you may not be saving as much as you think.

Some organizations that are especially stretched thin financially are opting to scrap 401(k) plans entirely. Fortunately, few employers are going this route, with only 1.3% of companies saying they're terminating their 401(k) plans due to COVID-19, according to the Plan Sponsor Council of America survey. Small businesses are more likely to eliminate their plans, however, with around 3.6% of companies with fewer than 200 employees taking this money-saving approach, the survey found.

If you're forced into an early retirement, you may need to tap your retirement savings sooner than you expected. This means your savings might not last as long as you need them to, and you could run out of money sooner than you thought in retirement. If you can swing it, try to lean more on your emergency savings at first so you can leave your retirement savings alone for as long as possible. The more time your investments have to continue growing, the longer they'll last.

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If you had big plans to travel the world in retirement, you might need to put those plans on hold for now. Nobody knows exactly how long it will be before the virus is contained and travel restrictions are relaxed, so as you're preparing for retirement, make sure you've considered how you'll spend all your free time if traveling isn't an option.

ALSO READ: 3 Travel and Tourism Stocks Poised for a Bull Run

Tens of millions of Americans are out of work right now, and that number could continue to increase as businesses face financial hardship due to the COVID-19 pandemic. That means fewer people may be in the market to buy a house right now, and if you were planning on moving when you retire, selling your home may be a challenge. Of course, this depends on where you live, as some communities have been hit harder economically than others. But if your retirement plan hinges on being able to sell your house, keep in mind that this may pose some difficulties in the immediate future.

The coronavirus pandemic has affected millions of Americans from both a health and financial perspective, and there's a chance you may need to adjust your retirement plans because of it. By having a strategy before you head into your senior years, though, you can ensure your retirement won't be derailed by COVID-19.

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