The COVID-19 pandemic has had a huge financial impact since cases began to escalate rapidly in March. Today, almost five months later, unemployment is still rampant and the economy is stuck deep in recessionary territory.
All of this is causing Americans to rethink their short- and long-term financial plans, so it’s no surprise to learn that 19% of American adults now plan to push back their retirement date, according to a new report. National survey. Of course, postponing retirement is a smart move for those whose finances have deteriorated during the pandemic. But is it the right decision for you?
The benefits of delaying retirement
Maybe your income has been affected in recent weeks. Or maybe you’ve lost your job completely and the lack of income has forced you to dip into your short-term savings or when you retire. In either case, delaying retirement is a smart move for several key reasons.
First, by postponing this step, you can leave your remaining savings for a longer period, thus stretching that money further. Second, postponing retirement gives you the flexibility to add to your IRA or 401 (k), meaning that if you were to make a withdrawal to pay the bills during the pandemic, you might have a chance to completely replace that. piece of money missing. .
Finally, if you delay your retirement, you might have the option of increasing your Social Security benefits. For each year that you delay taking benefits after full retirement age, you get an 8% increase, up to age 70. If your full retirement age is 67, you could get a 24% higher monthly benefit because of the wait.
Don’t assume that delaying retirement is an option
While postponing retirement is a good way to compensate for any financial shock you may have suffered in recent months, you cannot assume that you will be working as long as you want. Unfortunately, older workers are constantly excluded from their jobs, and although it is technically illegal to discriminate against employees because of their older age, it still happens.
Plus, you never know if any health issues are going to keep you from working down the line. And even if you to stay healthy, you may have to stop working sooner than you planned to become a caregiver for your spouse. As such, while there is nothing wrong with Planning to delay retirement, you also need a backup in case you can’t.
Focus on your personal financial recovery
It may take a while to get back on your feet after the COVID-19 crisis is over. But if you’re making an effort to recover in the short term, you may not have to delay retirement too much – or you may not hurt yourself too much if your plans to delay retirement don’t materialize.
What steps can you take to recover? On the one hand, try to replenish the funds that you have withdrawn from your retirement plan. You can do this by cutting other expenses to free up that money or by getting a second job (which may not be feasible or secure at the moment, but should be much more doable once the economy recovers. will restore and things will return to normal).
If you didn’t withdraw from a pension plan during COVID-19 but stopped contributing to your IRA or 401 (k), try to catch up and increase your savings rate once you are back to work or your full income. is restored. And again, it may require you to get a second job, but if you do it temporarily, it could do wonders for your financial situation.
Sadly, many people are suffering right now as the pandemic rages on, and if the current crisis is causing you to rethink your retirement plans, it makes sense. Postponing retirement is certainly not a bad idea, but you should also be prepared for the fact that it may not be possible. Instead, focus on what you can do immediately after the crisis to improve your long-term financial outlook.
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