Millions of Americans have seen their retirement savings take a hit during the pandemic. For couples like Anita and Russell Cowles, who had been counting on their nest egg to help fund their retirement dreams, the news has been especially disheartening.
The Cowles’ retirement savings have dropped by 25% due to the uncertainty of the markets. The loss equates to $500,000 of their savings and retirement accounts. “That’s a significant portion of our retirement,” Anita said with fear in her voice. “We had hoped to travel this year, but those plans have been put on hold.”
After originally retiring from his pilot career, Russell is now forced back into the workforce. Instead of going back to his original position, he is applying for smaller airline companies with lower pay. This is not a unique story, as millions of Americans are feeling the same pain.
According to Fidelity reports, the average 401(k) balance declined 23% in Q3 2020 and individual retirement account (IRA) balances decreased 25%, to $101,900 from $135,700. The future looks financially bleak for those who have already retired. Based on Janus 2022 Retirement Confidence Report, 59% of people aged 50 or older are cutting their spending back or plan to do so in the near future.
There are some proactive steps retirees can take to ensure their financial security, such as reassessing their budgets, returning to work if necessary, and delaying Social Security payouts until age 67 (or 70 if born in 1960 or later) to maximize benefits.
Marisa Rothstein, a certified financial planner with Siena Private Wealth in New York, explains that if you claim your Social Security earlier than your full retirement age, you will lose the annual growth rate credited to your account. Although stock markets typically rebound after drops, they do not jump back at a rate of 8% per year. Pushing off your Social Security payments could make a significant difference in your retirement income.
At the same time, retirees should be realistic about their future retirement needs and keep their money in the stock market. Even though the stocks are down, it is not the first time this has happened. Historically the stock market always recovers and is the best long-term vehicle for retirement savings.
For any retirees who feel uncertain about their future, financial planners recommend taking proactive steps to reassess their budget and return to work if necessary while they wait for their stock investment to bounce back.
The good news for those saving for retirement is that there are options available to help weather this storm. But it takes planning ahead and making smart financial decisions. Retirement may be a distant dream right now, but with the right strategies, Americans can still realize their goals.
The future is uncertain, but that doesn’t mean we should give up on planning for retirement. As the pandemic continues to test our retirement savings, it’s more important than ever to take the right steps today to ensure a comfortable tomorrow.
