How COVID-19 impacted retirement security, and what you can do about it

How COVID-19 impacted retirement security, and what you can do about it

(BPT) – 2020 has been a year full of challenges like no other. Things that were routine before, such as chatting with a friend less than six feet away, going to a ballgame or taking a vacation, have been upended due to the COVID-19 pandemic. Add to that broad uncertainty around jobs, the economy and the future, and it’s easy to feel unsettled by this turbulence. For those approaching or in retirement, it can feel like the plans you’d anchored in place are suddenly cut loose and you’ve been set adrift. But there are steps you can take to right your strategy and put it back on a steady course, as we all look toward brighter days ahead.

Since the long-term economic effects of the pandemic are still unknown, taking the time to consider your financial strategy and plan for a more secure retirement is prudent. In fact, October is National Retirement Security Month, providing a good excuse to assess and evaluate the challenges and opportunities facing your retirement security, and how to achieve your goals. If you’re uncertain about your retirement future, you are not alone: the Prudential Financial Wellness Census found 78% of respondents surveyed during the pandemic said not having enough savings to last through retirement is a top financial concern, making that the leading financial concern found in the survey.

Whether or not you have lost a job or have taken a salary hit, COVID-19 has probably impacted your retirement plans in other ways. Retirement accounts generally have a mix of stock market and bond exposure, both of which have been unpredictable since the economy has slowed down in March. According to a survey of individuals aged 45-64 conducted by MoneyRates, 44% reported losses of at least 10% in their 401(k) during the market’s earlier turmoil, while nearly a quarter (22%) said losses were more than 20%. Significant yield is hard to find in fixed income products as 10-year Treasury bonds are well below 1%, according to the latest rates from the U.S. Treasury. Therefore, it’s important to take a step back and take a hard look at how your retirement portfolio has been affected and ask if it’s time to pivot your allocations, savings, or investment approach.

While this is a complicated task, fortunately, there’s lots of help you can get along the way. Many retirement account platforms offer channels to access financial advice online or over the phone. And even though social distancing requirements and lockdowns have made meeting in person with financial professionals complicated, many financial professionals are utilizing technology to overcome this obstacle. Clients today can easily meet with their financial professional via video and teleconferencing to get advice when it comes to making complex retirement planning decisions.

Brad Hearn, president of Retail Advice and Solutions at Prudential, notes that financial professionals have found new ways of connecting with their clients.

‘As a first step in the journey towards helping you achieve real financial security, there’s no better time to communicate with the right professional who understands your retirement goals. We have seen historically that both financial professionals and clients generally prefer meeting in person, but there are abundant tools available to connect virtually, and financial professionals have wasted no time in adopting them,’ said Hearn.

In assessing your retirement security strategy, a financial professional is likely to examine your sources of retirement income to identify risks to future income streams and identify opportunities and solutions that can help fill any gaps. This could start with checking how you are utilizing your employer-sponsored retirement savings plan, such as a 401(k) or 403(b), and maximizing any matching contributions your employer may offer. In addition to offering tax-deferment options in retirement plans some employers may also offer the option to annuitize a portion of your retirement savings. Thanks to the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which removed one of the barriers that deterred many employers from offering annuities within workplace retirement plans, you may want to consider taking advantage of this option if your employer offers it. In addition to employer-sponsored plans, individual retirement accounts (IRAs) are tax-deferred options that individuals can use to save for retirement in a tax-efficient manner.

Once you have a handle on your sources of retirement income, it’s time to ensure they’re secured for the future. That could start with a simple assessment of your investment balance, looking at stocks or equities, bonds and any other cash savings accounts. With interest rates near historic lows and bond markets producing little return these days, it may be prudent to adjust your balance in favor of equities, particularly if you have a longer time frame until retirement. Given the uncertainty in today’s economy, protected income streams are looking increasingly attractive for those planning for retirement. In the past, most Americans would rely on a mix of Social Security and pension payments for income deep into retirement. The retirement picture now is much different. With corporate pensions all but nonexistent today and Social Security at risk of insolvency by 2034 according to the program’s trustees, when the oldest millennial will only be 54, solutions such as annuities can help create a guaranteed stream of income to help shore up other sources of income in retirement.

As the month of October and National Retirement Security Month come to a close, it’s still never too late to go back and review retirement portfolios and confirm the current strategies in place are driving towards the outcomes you want and need. Given the uncertainty of today, there is no better time to consider your plans for tomorrow.

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