As we continue to navigate these uncertain times, it is important to evaluate your retirement and how the coronavirus pandemic has affected your retirement plans. This year, we have experienced a national lockdown, business closures, and record-high unemployment numbers. It has certainly been a trying time for some. In this article, we are going to break down how the COVID-19 pandemic has affected your retirement. Keep reading to learn more!
During this pandemic, the CARES Act was passed in March. The CARES Act had three significant effects on retirement plans. According to Rob Berger, the CARES Act doubled the amount someone can withdraw from their 401(k). It also it allowed some individuals “to take early hardship withdrawals of up to $100,000 from 401(k)s and IRAs, waiving the 10% penalty tax on most withdrawals from these accounts made before the owner turns 59 ½ (Forbes). The CARES Act also granted retirees the ability to skip an RMD (required minimum distribution) in 2020 if they have inherited an IRA (Forbes).
For some, the CARES Act provided just enough coverage for relief during this time. However, for others, their retirement plans have shifted greatly. Some individuals were planning to retire by a certain age, but with the pandemic, their plans have been extended and contributions have been halted. What this means is that if you are not currently contributing to your retirement account, you may lose compound interest, which entails working longer than expected.
Over the last few months, we have seen the markets on a rollercoaster. The economic downturn as a result of the coronavirus pandemic hit some retirement accounts harder than others. We have seen volatile markets and stocks drop. Those who are close to retirement watched their retirement savings plummet, as the S&P 500, Dow Jones, and Nasdaq markets decreased greatly in February and March, which had a direct impact on those who invest their savings in mutual funds.
A few things you can do to prevent the coronavirus pandemic from hurting your retirement are to refrain from withdrawing from your accounts. If you do this, it can decrease the amount you earn in the future. Unless this is your only option, we do not recommend withdrawing from your retirement accounts during this time. Another option you have to reevaluate your portfolio. Right now is a good time to invest in some new stocks that are at a lower cost due to the pandemic. Once their value grows, you can sell them.
The most important thing to remember during a time like this is to not panic. Making decisions as a result of panicking can hurt your retirement. If you are on the verge of making financial decisions due to panic or fear, we are here to help. Contact us today and let’s get your portfolio straightened out. Give us a call at (847) 382-2600. We are here to help.