December 22, 2021
Planning for retirement can be stressful enough under “normal” circumstances—but when you throw a pandemic into the mix, things can get very dicey.
You’d be hard-pressed to find any aspect of everyday life that hasn’t been affected by COVID-19 in some way, and retirement planning is no exception. So, how exactly is the pandemic affecting people’s retirement plans? Let’s take a deeper look at some of the trends we’ve been seeing over the past couple years.
Fewer 401(k) Contributions
Unfortunately, the pandemic and its economic impact has led to fewer retirement plan contributions overall. People are (understandably) feeling more guarded about their money during these times. As a result, they may simply feel more comfortable holding onto their money rather than investing it.
People who are out of work as a result of the pandemic are especially affected by this. Those who may have previously had automatic deductions set up to contribute to a 401(k) no longer have that advantage. And of course, those who enjoyed 401(k) contribution matching from their employers are even more impacted by unemployment.
Higher Planned Retirement Ages
According to a survey by Northwestern Mutual Fund, the pandemic has caused approximately one-third of Americans to adjust their anticipated retirement dates. The majority of these people reported that they plan to retire later than originally expected, with many now planning to retire anywhere from three to 10 years later than expected before the pandemic.
There are many reasons why people may be retiring later as a result of COVID-19. For starters, those who are out of work because of the pandemic may no longer be able to contribute to their retirement accounts. As a result, they may simply not have enough money saved by their target date to retire comfortably.
In other cases, people may need to take time off work or quit their jobs to care for children or sick loved ones. This loss of income can make it difficult to stay on track for retirement.
Changing Investment Plans
During times of economic turmoil, it is common for people to change their investment strategies out of anxiety or fear. The pandemic has perfectly exemplified this. Rather than “staying the course” with a retirement strategy, many people are pulling money out of their accounts early (which has been permitted by the CARES Act in some cases) or simply switching to lower-risk investment strategies.
In general, investors advise that it’s best to stick to your original investment plans—even in the midst of an economic crisis. Letting fear and emotions play into your investment strategy can result in lower long-term returns, which can certainly affect your retirement plans.
Have Your Retirement Plans Changed?
There’s a good chance that your own retirement plans have been affected by COVID-19 in some of these (or other) ways. If you’re feeling stressed about your financial future, you’re not alone.
One option you may want to consider as a means of saving extra money for retirement is that of a life settlement. Specifically, life settlements allow you to sell your current life insurance policy for cash; you can then use that cash to supplement your retirement income and live the lifestyle you want. Meanwhile, a third party life settlement company takes over your policy and its premium payments in exchange for a lump sum cash payment.
Interested in learning more about selling your policy in a life settlements? Want to find out how much your policy could be worth? Check out our easy-to-use life settlement calculator to get started. From there, our knowledgeable team would be happy to help guide you through the rest of the process!