Your Retirement … with Brian & Bob: Financial concerns, considerations during COVID-19

70 percent of Americans expect their retirement to be delayed due to the hit from COVID-19

COVID-19 is impacting people’s investments and retirement hopes.

By Robert Price and Brian Harrigan

Despite the market rebound from March, many investors still worry about having enough to live on during their “golden years” of retirement. We are certain this comes as no surprise to Gilroy Life readers as we have all been affected by the COVID-19 crisis and unprecedented financial times.

During the past three years, our country’s national debt has increased $5.2 trillion! Yes, that is trillion with a “T.”

This is substantial even if we eliminate debt caused by the presence of a pandemic and corresponding stimulus package. According to the U.S. Treasury Report, the last eight months of our fiscal year we have added $1.88 trillion to our national debt. This is more than any 12-month fiscal year debt addition in U.S. History.

So … what does all this mean to you, our clients, readers of this publication and other fellow members of the south Santa Clara County population? It means we can expect lots of changes in the future to make up for this debt. These changes will not only affect this generation but probably several to come which means the quality of life you deserve in retirement and the quality of life you expect for loved ones, may not live up to your expectations.

A recent study from CNN showed that 70 percent of Americans expect their retirement to be delayed due to the hit their accounts have taken in correlation to the COVID-19 outbreak.

The Generation X population is one of the hardest hit generations with 40 percent of those surveyed stating they would be searching for another job in retirement to help with costs of living and the implication we have today of taxes being higher in the future.

Even with the market volatility and interest rates being at an all-time low, a recent Vanguard study showed many investors have not made changes to retirement accounts like 401k’s during the first four months of 2020.

Only 5.3 percent of investors actively contributing to retirement accounts were trading actively during this period. Still, with companies operating on less income and less staff due to COVID-19, business owners are looking for relief.

As a result, more and more companies are weighing cutting 401(k) matches due to the current crisis making 401k investing not as advantageous as it has historically been. Retail and hospitality industries have been hit the hardest.

If your employer offers a match and you can swing it from a budget standpoint, it is always advisable to contribute to maximize the match.

Another item to consider that is affected by the economic state and often overlooked is inheritance. Studies show most Americans not having enough savings to get them through retirement.

One in five retirees expect a large inheritance and 2/3rds of retirees depend on it. Since our crystal ball broke a long time ago and the future remains unknown, we advise for most retirees to not plan on a huge inheritance. For most, operating with this mindset can put you in a better position financially regardless of whether the inheritance comes through.

The lesson one can gain from these studies, trends, and forecasts is that planning today is more important than ever.

Interest around incorporating a retirement vehicle with some guarantee of income for life has gone up substantially as 42 percent of Americans say they are interested in learning more about these types of asset classes. There is no time to procrastinate and action should be taken even if the action is perceived as a baby step.

We encourage everyone to consult their financial professional or contact our office to learn about ways to combat future changes like inflation, taxes, and market volatility that can affect your long-term retirement security.