From health to wealth concerns, retirement planning during a pandemic can be overwhelming.
COVID-19 has had a detrimental effect on not only senior citizens’ health, but also their wealth. A survey by Fractl published by Personal Capital User Dashboards showed nearly 9 in 10 respondents felt worried about the financial impacts of COVID-19 on their retirement savings. Furthermore, 30% described themselves as “extremely worried” in light of the virus’ economic impacts.
However, these concerns didn’t happen overnight. The findings suggest that many felt unprepared for retirement prior to the pandemic – and many more are now feeling the strain.
Financial Impact of COVID-19
Even before COVID-19 surfaced, some researchers predicted an impending retirement crisis on the horizon. How? Because as individuals left the workforce, they simply hadn’t saved enough for retirement.
This has left millions of Americans in an immediate need for funds that may help provide financial stability. In response, lawmakers have lessened financial burdens through stimulus legislation that includes several temporary rule changes to retirement account withdrawals.
To help individuals in Iowa and across the United States, the CARES Act (The Coronavirus Aid, Relief, and Economic Security Act) could provide short-term relief. It’s purpose is to provide fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for American industries.
Provisions of the CARES Act includes issuing a waiver of the 10% early withdrawal penalty tax normally assessed on pre-age 59½ withdrawals, up to $100,000, across all retirement plan or IRA accounts, if you meet at least one of the following criteria:
- You have been diagnosed with COVID-19.
- Your spouse or dependent has been diagnosed with COVID-19.
- You face adverse financial circumstances arising from COVID-19, including, but not limited to, being quarantined, having work hours reduced, being laid off, or being unable to work because of a lack of childcare.
Note: Withdrawing any amount early from your retirement plan is a decision that shouldn’t be taken lightly, as you are taking income away from your future retirement. If you are considering this option, it’s wise to speak first with your retirement income advisor, as they may be able to present other options.
The CARES Act also brings further benefits to retirees:
- RMDs: RMDs suspended for 2020 in light of the financial effects of the coronavirus crisis. That applies to accounts you own, as well as accounts you inherited from someone else. (RMDs must be taken again starting in 2021.)
- Medicare/Medicaid: if you’re on Medicare and have Part D coverage you can receive a three-month supply of medications when refills are allowed. It also allows for the expansion of certain services under Medicaid, including mental health services, as well as directing more money toward programs designed to aid seniors with things like caregiving and paying basic expenses.
- HSAs: The CARES Act expands the definition of qualified medical expenses to include over-the-counter medications and health aids, something that wasn’t previously allowed. You can now also use HSA funds to pay for telehealth and remote care services if you’re getting medical care without leaving home.
- Stimulus checks: A second and perhaps third wave of stimulus checks is on the horizon for individual tax filers. Those who earned $75,000 or less in 2020 can receive $600 through the act. If you’re married and file a joint return your stimulus check could double to $1,200, assuming you earned $150,000 or less for the year.
Lawmakers are still in debate on President Joe Biden’s third-round stimulus package and who should receive it.
Mental Wellness Impact of COVID-19
It’s difficult to focus on financial preparations for retirement when you are facing more immediate financial concerns and worried about the future.
The mortality rate from COVID-19 increases with age, and those with underlying health conditions are especially vulnerable. Many older people have more than one health condition.Nearly one in five Iowans is over the age of 65.
Because older adults are especially vulnerable to serious complications from COVID-19, the extra effort to keep them as safe as possible has been imperative. However, many family members and medical professionals are also seeing the side effects of social isolation for older adults: depression, anxiety, and general loneliness are on the rise.
In a survey conducted by The Pew Research Center, 49% of people 65 years old and older in the U.S. see COVID-19 as ‘a major threat’ to their personal health; 43% of people ages 50-64 feel the same.
To assist coping with the stress and isolation during the pandemic, try the following suggestions:
- News breaks: Take breaks from watching, reading or listening to news stories that could inflict further fear.
- Take care of your body: Exercise, sleep, a healthy diet and cutting back on depressants such as alcohol can all help mental and physical well being.
- Relax: Make time to unwind and spend more time doing other activities you enjoy.
- Connect with others: Talk about how you are feeling with loved ones and healthcare professionals.
- Connect online: Use technology to connect with your community, friends and family to combat the feeling of isolation.
- Plan your vaccine: The sooner we are vaccinated, the sooner restrictions will lift. Comcast NBC Universal has launched a new tool,Plan Your Vaccine, to help. This interactive and personalized state-by-state guide has everything you need to figure out when and where to receive the vaccine.
The silver lining is that the pandemic has created space in many people’s lives to slow down, spend time with family, refocus on what’s important, and connect with one another in new ways.
Pandemic-Proof Your Retirement
As we are navigating the evolving challenges that come with COVID-19, things are changing very quickly as we face unexpected emotional and financial hurdles.
Being unprepared is a lesson we can all take both financially and emotionally. Unless pre-retirees and newly retired individuals re-evaluate their retirement plans, they could face potential financial catastrophes because of the pandemic’s financial effect, which in turn, leads to mental turmoil.
If you are worried about how COVID-19 may impact your retirement savings or you want information on how to help minimize the virus’s impact on your retirement savings, schedule a consultation with Johnson Wealth and Income Management. Whether you are seeking advice on new investments or looking to diversify your current retirement portfolio, we are here to help.
Contact us here today to set up an initial meeting to discuss your specific needs in these uncertain times.
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