It is nearly impossible to prepare for the COVID-19 pandemic. Everyone has been affected very differently when it comes to coping with this global emergency. It has caused a state of fear of the unknown. One thing that we do know is that pandemic will end. The quarantine will end, and you will go back to your life outside of the home. Yes, it may be different from before, but one thing that everyone should have in mind is to prepare for the future.
When looking into the future, retirement is a crucial time in our life to prepare for. For some, retirement is 20-30 years off; for others, retirement can be in the next few years. This can be a fearful time for people who have money in the stock market. Some individuals think their financial losses are forever, and they will not get it back. I want to give you another perspective on this matter, and that would be seeing this as an opportunity rather than a step backward. What we must remember is that when the market is down, money is on sale, and you are buying more of it each pay period. The hardest sale to take advantage of is the stock market! Let your money work for you by not trying to time the market.
When planning on retirement, there are a few questions you have to ask yourself:
– How long until I retire?
– How am I going to live in retirement?
– How much am I currently saving?
– Will it be enough?
All of these questions will help you understand what retirement will look like for you. Consider how many years until retirement. The farther off retirement is, the more time you have to plan. There is no one specific way to spend your money. Everyone’s situation and retirement perspectives are different: Some people want to travel in retirement, others might want to have time and money to enjoy their hobbies, some might downsize there living quarters. The key is to have options when you get to retirement, so that you may afford the things you want to do. Now how can you make your ideal retirement a reality? The simple answer is making sure you have enough of a nest egg to provide the income to afford it. We touched on investment volatility near the beginning, but I think there is an even more critical aspect to achieve your ideal retirement income. And that is how much money are you putting away? How much are you saving towards retirement? People ask me, “How much should I put away?” The answer is this number can change from person to person. There are many variables at play to get to an ideal saving rate. One thing that you never hear from people is, “I saved too much.” So, ask yourself, can you put more money away? More often than not, you can adjust your spending to put additional savings away.
What are some retirement savings vehicles available for you to put away additional income and savings? The first thing is your company retirement savings plan, such as 401(k), 403(b) and 457 plans. These plans may have a company match; this is essentially “free money” if you contribute. Always try to maximize your company benefit! Please note that the maximum contribution to a 401(k) and 403(b) is $19,500 for 2020; if you are over the age of 50, you can put an additional $6,500. If you are looking for other ways to save, there are other sources such as an IRA, HSA, or Individual Brokerage account. Please note the IRA and HSA have maximum contribution limits. For more information, please click here.
There are multiple ways of putting away additional income for retirement. You need to ask yourself how much are you saving currently? Can you put away more? This is a very important decision to make regarding how your retirement will look. The more time you have on your side, the more opportunity you can have. That being said, it is never too late to start saving or increase your savings. If you have 5 years until retirement, can you increase your contributions now? Every little bit extra you put away now will make a difference for your future. Think ahead; with a bit of planning, you can have a happy, long, and safe retirement.
The Financial Fitness for Life team has created a COVID-19 support page. With a variety of articles and videos that offer you guidance during this difficult time. Including tips on handling Investment Volatility so you may look deeper at the benefits of staying the course. https://fitrusts.com/coronavirus/
We would love to hear from you about how increasing your saving has benefited your retirement strategy. Please share stories and other reasons why increasing your savings will be beneficial in the long run!