As you inched closer and closer to retirement, everything was going according to plan. Your financial plan, that is. You’re not alone. Along with the global pandemic has come the closing of schools from elementary to graduate programs, the cancellations of weddings, layoffs, furloughs, firings, and so much more.
Says Cheapism.com, especially hard hit are the 50 and 60 somethings who are getting ready to retire or have recently retired. After spending many decades in the daily workforce grind, it was supposed to be a time to kick back and enjoy the good life. But along with COVID-19 came a definite change of plans, both personal and financial.
Saying Bye Bye to the Workforce
While full retirement might have seemed like a nice reality for you just a year ago, the pandemic just might have chased that dream away. A recent study by SimplyWise found that 72 percent of respondents stated they would now have no choice but to work at least part-time during their retirement years. That represents an increase from 67 percent just a few months prior.
What’s driving this sentiment? More than likely, a severe decline in income, with only about half the respondents saying they are making the same money they did prior to the spread of COVID-19. Some still haven’t paid off all their debt prior to retirement. While many will have no choice but to continue to work during their retirement years, others will tap into their home equity by applying for a reverse-home loan. This one financial move alone would eliminate the need to make a monthly mortgage payment while, at the same time, provide a substantial lumpsum payout which you can use to eliminate all or some of your outstanding debt.
Getting Out of the Rat Race When You Want
With many would-be retirees having no choice but to stay in the workforce after retirement thanks to the pandemic, a significant portion of the workforce is actually choosing early retirement. Says Miller & Company CPA, Paul Miller, a significant number of government employees, police officers, teachers, sanitation workers, and more, are opting for an early retirement. “They haven’t been given an incentive,” Miller goes on. “They just feel they don’t want the risk of working, either in a hostile environment or a risky health environment.”
Making matters worse, many workers have been forced to retire. SimplyWise states that one in five retirement age or close to retirement age workers have simply been fired or furloughed due to COVID-19
Downsizing Your Life
Under normal circumstances, leaving the workforce means downsizing by selling the big primary residence you no longer have the time to maintain now that you’ll be spending your days on the golf course, fishing your favorite lake, or even starting that novel you’ve always wanted to write. However, the pandemic has created uncertainty in everyone’s life.
Says applied developmental psychologist Deborah Heiser, who specializes in mid-life to retirement age people, “I have seen a reluctance to make any move, downsizing included.” She also notes that more seniors are looking into reverse mortgages to afford them at least some financial security during the pandemic.
Volunteering and Nabbing a Part-Time Gig
Lots of retirees look forward to working a part-time job or gig, or volunteering not only to provide additional cash but also simply to stay busy and relevant. These jobs might include substitute teaching, cashier at the local mega-mart, or even a pizza delivery person. But these jobs require lots of person-to-person contact which puts seniors at risk of acquiring COVID-19.
Michael Barry of Chicago’s Plan Advisory Services suggests there could very well be a surge in young employment at the direct expense of the old because of the pandemic and the risks involved. One solution for retirees is to make the transition to telework which can be performed from the safety of your own home.
A Big Beefy Retirement Account
It’s quite likely that for years, your financial advisor has been preaching the pitfalls of tapping into your 401K retirement account too early. But the Pandemic has left many persons facing down a suddenly reduced income with very little choice. SimplyWise found that 23 percent of its participants who are in their 50s are planning on taking cash out of their retirement account since the CARES Act has temporarily eliminated the ten percent penalty on individual withdrawals.
Still, financial advisors insist that digging into your retirement account should only be a desperate act of last resort. But even if you are doing your best not to tap into your 401K, you might also find yourself not contributing as much as you should just to keep your financial situation afloat.
Things haven’t been easy on any age group during the stressful, indeed deadly time of the COVID-19 pandemic. Seniors especially have felt the pain since for many, their retirement dreams have either been crushed or placed on indefinite hold. But if you find yourself short on cash, there are things you can do to make up for it, like seeking out a reverse mortgage loan, taking on a side hustle like blogging or influencing, or even investing in a cryptocurrency like Bitcoin, which in the past 12 months alone has appreciated 400 percent. But it’s important to keep in close contact with your financial advisor and/or do your own research on how to rebuild not only your retirement account, but your retirement dreams.