A recent report from GOBankingRates found that having a comfortable 20-year retirement in Georgia costs more than $1 million or roughly $56,000 annually.
Saving for retirement can be a daunting task under the best of circumstances, but the coronavirus outbreak has thrown those near retirement an added curveball.
The unpredictability of the virus has raised questions about how it will affect the economy and the money people have set aside for retirement.
How will the coronavirus potentially impact your retirement plans? Here’s what experts say.
Is now a good time to retire?
If you were planning to retire this year or next, some financial experts recommend trying to delay those plans and stay in the job market for now, if possible.
Steve Sexton, financial consultant and CEO of Sexton Advisory Group, told U.S. News & World Report that staying in job for the next 1-2 years could give your 401(k) ample opportunity to recover and return to your expected retirement income level.
"Unless you already had a plan in place to mitigate the effects of a market downturn, the decline in your 401(k) values may require that you work a few more years before retiring," Sexton told the outlet.
While someone with a guaranteed income like a pension could be in a better position to be able to retire soon, David McPherson, founder of Four Ponds Financial Planning, told MarketWatch that he is advising folks not to make any decisions around when to retire at this time.
“As a general rule, I would try delaying retirement decisions until we get past the current public health crisis and have a better idea of how we will emerge from it,” he said.
What will the coronavirus mean for the money you’ve saved for retirement?
As the market fluctuates amid the uncertainty of the coronavirus, people have seen their 401(k) plans take a hit, especially those who are close to retirement.
"Eventually, the economy and the stock market will recover and COVID-19, the disease caused by the novel coronavirus, will be contained. Yet the current pandemic and its economic consequences could devastate the retirement prospects of some Baby Boomers," personal finance columnist Janet Novack wrote in Forbes.
But there are some steps you can take to try to protect your 401(k) during this time of crisis. First of all, experts advise not letting panic steer your decisions. Retirement accounts are set up to play the long game, not day-to-day developments.
Financial experts agree that the markets will eventually bounce back. If possible, try not to make any major financial decisions right now.
"Reviewing your 401(k) plan account daily doesn't help keep you calm and may create more panic. The market is volatile right now, and if you stay the course, you don't need to look at it every day," Katharine Earhart, partner at Fairlight Advisors, told U.S. News & World Report.
What happens if companies stop matching contributions?
In times of economic hardships, some companies will cut back on the matching contributions they make to employee’s retirement accounts. This was common practice during the Great Recession, but many companies have since resumed matching contributions.
However, even if your company does make that move, you should continue your contributions if possible, writes Washington Post personal finance columnist Michelle Singletary.
"If you're already contributing, don't change a thing. The match is a bonus. In fact, if you can afford it, increase your own contributions to make up for the lost employer match," Singletary writes. "Yes, the matching contribution may have been the lure to persuade you to save for retirement. But its reduction or suspension does not change your need to save for your future retirement."
Can I access the money I have saved up for retirement now?
The CARES Act, the formal name for the economic relief bill that Congress passed and President Donald Trump signed at the end of March, has dramatically relaxed the IRA and 401(k) rules to the benefit of millions of Americans, investment adviser Wes Moss notes.
The act waives the 10% early withdrawal penalty if you make a withdrawal before the traditional age limit. It also allows individuals to borrow up to $100,000 from 401(k) accounts.
However, Singletary recommends avoiding this path, if you can. She writes that individuals should "make this move your last resort."
“These are extraordinary times, which call for extraordinary measures. Avoid tapping this resource, especially if you were already not saving enough for retirement,” she writes in The Post.
Ultimately, most experts advise staying the course, if you’re able. The markets will eventually recover, although no one knows when exactly.
"The best thing a person can do is stick to their plan, keep fear, anxiety and bias out of it, and really understand their budgets to see if there are some aspects of expenses that can be forgone in bad times," Alan Rhode, a certified financial planner and CEO of Modern Wealth told U.S. News & World Report.
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