Just as the Coronavirus itself has a greater impact on older populations, the job losses during this pandemic have disproportionally impacted pre-retirees. The final few years before your retirement can be vital for your retirement and financial future. Read on to learn about the uncertain fate many adults are facing as they near retirement and three things you can do to be prepared despite these uncertain times.
Just the Facts
As of June, 2.9 million older workers had been forced out of the United States workforce. That equates to 7% of the working population between the ages of 50-70 who were involuntarily unemployed. This number is growing. The number of older workers losing their current jobs is expected to reach 4 million by the end of September.
While it is well known that many Americans have been unemployed or furloughed during this pandemic, the disproportionate job loss faced by people aged 55-70 has been mentioned far less. 7% of people aged 55-70 years are leaving the labor force, compared to 4.8% of workers aged 18-54 who are leaving.
These numbers are unprecedented in recent times. Even the 2008 Great Recession, only 4.7% of workers aged 55-70 and 3.2% of people aged 18-54 experienced unemployment. While older workers were still forced out of the workforce at a higher rate, the disparity between the unemployment of older and younger workers was far less. Older people in the job market often have a tougher time finding a new job; research has shown that someone in their mid-50s to 70s takes, on average, twice as long as their younger counterparts to find a new position.
But why should I care?
If you’re nearing the age of 55, you very likely know the importance of saving for retirement. The amount you save now directly impacts the future of you and your family.
Early retirement due to unemployment from this global pandemic will greatly impact any retirement plans and financial security you may have previously expected and/or planned for. According to Teresa Ghilarducci, director of the SCEPA, the job losses fueled by the pandemic will put 3.1 million older Americans into or near poverty during retirement, regardless of income levels. This forecast is incredibly alarming, as most people strive to live a peaceful retirement and to leave a lasting legacy for their children and grandchildren.
What can I do?
While the numbers, facts, and predictions are grim, it’s important to remain focused on your future.
You have the power to face these challenges head-on and work for the retirement you’ve planned for. We love to help our clients gain peace of mind and confidence in their financial future. Below are some tips to help you do the same.
1. Estimate Expenses
Do you plan on traveling, working a part-time job, volunteering, or visiting grandchildren? What you want to do during retirement will impact how much you need to have saved. It’s therefore very important to estimate your expenses. To do this, you must consider your situation and avoid broad or general estimates.
To get a more personalized estimate, focus on your expenses as they are today, and think about whether these expenses will change by the time you retire. For example, costs for commuting for work may go down while costs for healthcare may increase. It’s all specific to your situation.
Be sure to include expenses that reflect the type of retirement that you want to live. If you plan to travel, make sure to estimate how much you will be spending on it.
Remember to take into account the potential impact of inflation and taxes. As grim as it might be to think about, you also have to consider how long your retirement and life will last. Consider factors like family history, race, sex, health, and lifestyle. There is no way to exactly predict the length of your life, but it is better to anticipate a longer life and end up with too much than too little. The Society of Actuaries has done surveys that show that nearly half of pre-retirees and retirees underestimate how long they’ll live by five years or more.
2. Know and Differentiate Your Future Income
Social Security is something most people rely on for a portion of their retirement income. Other options include but are not limited to:
The amount you will receive depends on the amount you invest, the rate of return, and other factors.
If you work during your retirement you can also count on that as an additional source of income.
If you have recently lost your job you may want to consider your 401K and the options you have with rolling that over into a new position.
3. Be realistic
Losing your job at any time can be heartbreaking and scary, but right now in these uncertain times, it can be even scarier. If you have not lost your job, you still may have some fears as you near retirement age. The next thing we recommend doing is to look realistically at your situation.
After you have calculated your anticipated expenses moving forward, analyze what you need to do to get from where you are now to where you want to be. This will depend on your current savings, your anticipated lifestyle, and the legacy you want to leave your family. As you compare your estimated expenses and anticipated retirement income options, you may need to adjust by doing one of the following:
Save more immediately delay retirement
Work during retirement
Increase earnings on the retirement assets
Find a new source of retirement income
Spend less during retirement
Remember: A plan can only get you so far. It is important to review your plan and portfolio regularly to ensure you are on track to reach your goals. Retirement is an exciting time as long as you’re smart about creating and following a retirement income plan. A financial professional can help you with your options, cater to your goals, and come up with a plan that’s best suited to you. To set up a free consult call 716-568- 8568.