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The Coronavirus pandemic has made 2020 a tough year for most Americans, with a significant number facing layoffs, pay cuts, and furloughs. The knock on the global financial markets has affected both investors and pension plans, with the next generation of retirees’ financial security now in jeopardy.
Here are six ways the pandemic might impact your retirement savings and planning.
If the 2007-08 financial crisis is anything to go by, retirement plans are in for a rough time ahead. Ominously, some pension plans are yet to recover from the effects of the 2007-2009 Great Recession.
The stock market is a crucial investment vehicle for savings by both individual investors and fund managers. With the stock market plunging to new lows, trillions of dollars have gone down the drain. Workers who had high hopes of a smooth landing after retirement will need to go back to the drawing board.
Rampant workers layoff is a major concern since the laid-off workers do not have the money to continue building on their retirement kitty. Millions of workers in the US have filed unemployment claims over the last few months. Although they may be receiving unemployment benefits, it’s not sufficient to pump up their saving for retirement.
Workers who have lost their jobs have more pressing needs, such as food and rent. There is also pressure to keep up with health insurance premiums. The consequence is that most people dip into the retirement accounts with no immediate means of replenishing the funds.
Workers over the age of 62 and who have lost their jobs have minimal chances of getting reemployed. This means they will probably access the social security benefits earlier than expected. This will affect their twilight years. As an early retirement will lead to earlier use of retirement benefits. Which will be affecting the funds’ longevity, especially if they will need home or residential care.
Pay cuts and job losses because of the COVID-19 pandemic affect your contributions towards individual retirement plans. With no current contributions to the retirement account, the growth of the retirement kitty stagnates. This interferes with the savings target, and you might have to work for additional years to recoup the lost time and deferred savings.