The Importance of Revisiting Retirement Plans Following Major Events
Planning for retirement is an ongoing process that needs to be constantly revisited—particularly following significant events that could potentially alter your planning, such as the COVID-19 global pandemic. With the events of the past 18 months having impacted everyone in one way or another, now is the perfect time to reexamine your retirement portfolio and determine if you need to make any adjustments or alterations.
The coronavirus impacted the finances of nearly everyone, whether positively or negatively. While some people lost jobs or had their salaries temporarily reduced, others saw their investment portfolios soar or simply managed to bolster the amount of money they were able to save because social distancing requirements led to drastic reductions in their daily spending habits. Wherever you fit in this scale, it’s a good idea to look at how your long-term retirement plans were impacted by the pandemic, and whether there are changes you should make now.
If market increases led to significant gains in your investment portfolio and left you ahead of where you expected to be, it may make sense to speak with a financial advisor and see if there are ways to permanently lock in some of these gains in order to avoid the possibility of downward market shifts in the future. Alternatively, it might be the perfect time to add some new investments into the mix, particularly if an unexpected boost allows you to safely add a bit more risk into your portfolio that could lead to even greater gains down the road.
Conversely, if a job loss or poorly performing investments have set you back, it may be a good time to rebalance your portfolio or find ways to increase your retirement contributions by scaling back spending in other areas. In the case of a job loss, if lost income forced you to dip into your savings or emergency fund at some point over the past year-and-a-half, rebuilding that fund should be your top priority. If the pandemic taught us anything, it’s how easily one’s circumstances can rapidly and unexpectedly change, and just how important it is to have available cash to fall back on. Financial advisors suggest keeping the equivalent of six months of your average living expenses accessible at all times, so that is the minimum goal you should work toward.
Depending on how hard your finances were hit by the pandemic, delaying retirement may be something else to consider if you are nearing the age when you initially planned to retire. According to the recent findings of The Nationwide Retirement Institute 2021 Social Security Survey, 15 percent of Americans are thinking about delaying their retirement due to the pandemic. If retirement is something that was in your near-term plans, and you experienced significant losses because of the pandemic, delaying retirement is probably a good idea—particularly if you were planning to retire before the Social Security Administration’s full retirement age, which is 66 years-old for individuals born between 1943 and 1954. Retirement prior to that age means a smaller amount in monthly Social Security benefits, while waiting to retire until the age of 70, if possible, ensures that you will get the greatest amount you are eligible for in Social Security payments.