4 Ways the Pandemic Has Impacted Retirement

The COVID-19 pandemic has impacted millions of Americans and their retirement plans. See the top 4 ways that retirement planning has been affected.

The COVID-19 pandemic has had an impact on retirement planning for millions of Americans. Financial planners are seeing more clients who have either lost their jobs or are worried about losing them in the near future. The pandemic is also impacting retirees, especially those with defined benefit pensions which are shrinking due to decreased interest rates and lower long term returns on investments.

Americans are early withdrawing from their 401(k) to make ends meet

Those who are close to retirement age may have had to early withdraw from their 401(k) due to job less and unexpected medical bills. This has caused a huge crisis for Americans who were planning on retiring soon. While the federal government halted penalties for withdrawing early due to the pandemic, the rules stipulated that the money must be put back in full in three years' time. Compound interest is a major benefit of retirement savings, so taking money out of your account or postponing putting money away is a major hindrance to retirement.

Americans have unexpectedly been losing their jobs

The pandemic caused millions of Americans to lose their jobs. This is a major crisis for those trying to plan and save money for retirement or already retired. People who were planning on living off of Social Security benefits now have less income than they anticipated, especially if both spouses lost their jobs and had to take part-time work where available. Even those who have kept their job may find that they are not working as much or the pay cut was severe enough to make a significant dent in retirement planning. Many people are no longer able to continue with their contributions since they are not working full-time anymore or simply do not have the income available to put toward retirement savings.

Americans have been forced into an early retirement

For many people, the pandemic has forced them into an early retirement. Many are unable to work due to illness or injury and cannot perform their job anymore even if they wanted to. This is especially true for those working in healthcare where employees have been exposed multiple times throughout the course of the pandemic. It's not just illness that's forcing people into early retirement, though. With the US economy in dire shape throughout 2020, it was extremely difficult for anyone to find a job, let alone those who are nearing retirement age. Many people who were planning on retiring after 2020 were forced to end their careers much earlier than they had expected.

Americans are using their retirement accounts on medical bills

Medical coverage is expensive in the US, even for those who have insurance. Throughout the pandemic, Americans have had to pull from their retirement accounts to pay for medical bills from COVID-19. This has further contributed to the retirement crisis because there is a monetary penalty for early withdrawal in addition to spending money that was set aside for retirement.

The pandemic has affected retirement, but it's possible to bounce back

It's not all hopeless. There are resources available for those who have suffered financially from the economy crashing due to government lockdowns and massive lay-offs. A consultation with a financial advisor may be one of the most important things you do if your retirement accounts or plans have been affected. A financial advisor will be there to help you get back on track.

Related Articles

• Financial Lessons We Are Learning from COVID-19
• Don't Panic: Retirement Planning Amid (Coronavirus) Fears
• How to Boost Your Retirement Savings