What Can I Do if COVID-19 Threatens My Retirement?

Please Share!
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email

COVID-19 threatens retirement savings for many.

Perhaps you saved early for retirement.

Maybe you waited until later in your career.

Either way, your retirement savings were invested for future growth.

All was well.

Unfortunately, COVID-19 threatens your retirement because of the economic downturn.

Is all hope lost?

According to a recent USA TODAY article titled “What you can do if coronavirus is threatening your retirement,” seniors should take action during this time to protect themselves from greater loss.

What can you do?

COVID-19 could threaten your retirement savings.
The economic impact of COVID-19 could burn through your retirement savings.

401(k) Contributions

Catchup contribution can be made into 401(k) and IRA accounts as you hit age 50.

In 2020, you can place up to $6,500 into a 401(k).

If you are over age 50, you can contribute $1,000 more than the $6,000 limit into a Roth IRA or traditional IRA.

With low market returns, you may want to reduce contributions if you are nearing retirement.

Taking time to reduce your debt in the form of a car loan, credit card debt, or a mortgage will be beneficial.

Paying off debt in retirement can be difficult with your savings being the main source of income.

IRA Distributions

At age 59½ you can begin making withdrawals from your IRA or 401(k) without being hit with a 10 percent excise tax.

If you are still working, you can contribute to your employer 401(k) as long as you are eligible.

Once you turn age 72, you will need to begin with drawing funds from your traditional IRA and 401(k).

Contributions to traditional IRAs are not allowed when you reach age 72.

However, if you have a Roth IRA, you can continue contribution.

You will have more in these accounts when you retire if you delay withdrawals and continue contributions.

Car payments

Do you really need a new or nearly new vehicle?

If yes, a lease may be a good option.

These often have lower monthly payments and down payments than the purchase of a new vehicle.

When your lease term is up, you can start a new lease.

When purchasing a new car, typically the loan takes five years to pay and you can drive it for about 10 years without payments.

Purchasing an affordable vehicle can save a significant money over time.

Social Security

You can begin collecting Social Security retirement benefits at age 62.

You are required to begin taking Social Security at age 70.

If you take Social Security early, your monthly payment will be reduced for the rest of your life.

If you delay to age 65, your monthly payment will be increased.

When you delay collection until age 70, your monthly payments will have increased to their maximum available amount.

It is often wise to delay so your monthly income will be higher when you need it most.

Reverse Mortgages

These mortgages often have a negative reputation.

Even so, there are situations where these make sense.

Is your home your most significant asset?

Do you need cash with COVID-19 threading your retirement and have no other means to get it?

If yes, a reverse mortgage might make sense.

Your mortgage must be paid in full or almost paid before you can qualify for a reverse mortgage.

Downsize

Do you need the amount of space you currently have?

If no, consider selling your home and purchasing a smaller place.

Perhaps you can pay cash for a smaller home and use the additional sale proceeds to pay other debt.

Other Ideas

Keeping your car until it must be replaced can save you money.

Working for a few more years will provide additional earned income.

You can also reduce monthly spending by reducing living expenses, taking advantage of senior discounts, joining AMAC, or pre-planning your funeral.

Although COVID-19 threatens your retirement, you can take action to protect what you have built.

Reference: USA TODAY (April 13, 2020) “What you can do if coronavirus is threatening your retirement”