By the end of 2019, you may have begun to set plans in motion to retire in 2020. And then, well, 2020 happened. In any period of disruption, when you experience sudden change that may affect your finances - a job setback, the unexpected death of a spouse, or a global pandemic - it can be difficult to know whether you can (or should) carry out your retirement timeline like you planned. Knowing that the current environment has the potential to affect retirement savings, what should someone do in the event that they still want to retire? Is it possible, or should you remain in the workforce for a little while longer?
Before the pandemic: a few statistics
Before the pandemic, according to the September 2020 Transamerica Retirement Survey of Retirees, only 47% of respondents indicated that they felt they had enough money saved going into retirement. Furthermore, only 46% were confident that they would be able to afford long-term care if needed. Additionally, most respondents said that Social Security was their primary source of income.
Not sure if you’ve saved enough for your age range? Investopedia says the majority of people need to step up their retirement saving efforts - and by your sixties, you should have at least 8 times your annual salary in your retirement nest egg.
What you should consider before retirement during a period of disruption
It’s worth noting that, under the current circumstances, Americans surveyed in July 2020’s SimplyWise Retirement Confidence Index reported that their greatest retirement concern was outliving their savings. One in five Americans in their 60s had lost their jobs or been furloughed.
Whether your financial situation has rapidly changed, or whether you’re able to continue working and delay retirement for an extended period, here are a few questions you’ll want to cover with your financial advisor to ensure the transition into retirement goes as smoothly as possible.
What resources do you have at your disposal?
Even if you’re behind on your retirement savings, are you considering all sources of income? If you have cash, non-retirement accounts, a pension plan, retirement savings accounts like an IRA or Roth IRA, or even properties, you and your financial advisor can look at the big picture in order to figure out what you need to do in order to make retirement the best choice for you.
Do you need to maintain your current lifestyle?
Living within your means can be difficult even for people who aren’t considering retirement. And while it’s an easy enough concept to understand before you retire, reality might hit harder. Once retirement is a go, you’re more reliant on social security or other passive income - the days of collecting steady paychecks are over. Furthermore, will you need to make sure that healthcare finances are a part of your day-to-day life? Are you still covering a child’s or grandchild’s education? These are all life factors that need to be considered.
If there are things you can do to cut back on your current lifestyle now, discuss this with your financial advisor. If it is important to you to be able to life the same way you are currently, your advisor needs to know that, too.
Is your portfolio properly allocated?
While it’s always a good idea to review your portfolio with your financial advisor to make sure that your investments are aligned with your risk tolerance, you might consider diversifying your portfolio or changing the allocation in order to be more conservative. If you have any questions, Chatterton & Associates’ financial advisors are always available to help and we can run cash flow scenarios in order for you to get an idea of what your income needs might be.
Prepare for retirement with Chatterton & Associates
Planning for retirement, even in a time of disruption, doesn’t have to be scary. Done well, you can live comfortably no matter the circumstances. Learn more about how we help you plan for retirement and if you’re ready, contact us today to talk about your options.
The Team at Chatterton & Associates
Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Royal Alliance Associates, Inc., nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.