Coronavirus has already changed a lot about life as we know it. You can count on it impacting retirement, too. Here’s a look at some of the potential changes.
Reliance on Social Security
The coronavirus is leaving people without jobs and with massive losses in retirement funds. That means there’s a good chance more people will rely on Social Security payments to help them out during their golden years. In fact, early claims will likely increase. As USA Today reports, that’s exactly what happened after the last recession ended in 2009. About 42 percent of 62-year-olds — the youngest age at which payments can be accepted— signed up for Social Security benefits. That was an increase of almost 10 percent compared to 2008.
The market has taken quite the tumble since the coronavirus outbreak, so your retirement accounts are likely hurting. With that in mind, do whatever you can to avoid withdrawing money from your accounts. Use your emergency funds and regular savings first. This way you can give your retirement accounts time to rebound when the market recovers (as it has always done in the past.)
The Cares Act was a rather hastily written bill, so there’s bound to be some confusion down the road. As USA Today notes, one area of confusion involves taking “coronavirus hardship” distribution from your retirement account. If you take a permanent distribution from a 401(k) or IRA, the 10 percent early penalty could be waived due to hardships that include job loss, employment hours decreasing, etc. However, if you find a new job or decide you don’t actually need that money within three years, you can re-deposit those funds without paying a tax. Some people who take withdrawals might not realize this and that could lead to some headaches down the road. Try not to make any big financial decisions without truly thinking them through.