While there are few things all Americans can agree on these days, there is one thing uniting the majority across political affiliations: their fears for the future.
In the wake of the pandemic, more than half of Democrats, Republicans and independents are worrying about their financial security in retirement, according to a study from the National Institute on Retirement Security.
And there’s reason to believe those fears aren’t unfounded. Between having to delay their plans, draw from retirement savings early or take on unexpected debt, the pandemic has been especially hard on those who are approaching retirement or recently retired.
Here’s more on the scope of the issue and how you can design your retirement plan to be crisis-proof going forward.
How has the pandemic affected retirement plans?
The NIRS study found that 67% of Americans approaching retirement say they’re delaying their plans because of COVID.
For many Americans, decreased hours, wage reductions and layoffs or furloughs led to having to make tough decisions that impacted their savings for retirement:
15% had to make changes to their investments.
12% made retirement plan withdrawals.
10% decreased their retirement plan contributions.
5% took out retirement plan loans.
Respondents reported their finances on the whole suffered throughout the year, with 22% who had to cut into their emergency savings, while another 5% had to take out a loan to get by.
The NIRS survey notes there’s been a recent shift from employer pensions to individual retirement plans, placing the burden squarely on workers’ shoulders -- and many indicate it’s a weight they’re unsure they can carry.
About 68% of those surveyed by NIRS say the average worker cannot save enough on their own to guarantee a secure retirement. And 65% add they’ll likely have to work past retirement age to have enough money saved up for a comfortable retirement.
What can you do to help keep your plans on track?
For some baby boomers, the pandemic was the impetus to take retirement early.
But that means they may be considering taking on some work on the side to maximize their income while they can.
Options like taking on a flexible side job can help you continue to draw income to ensure you can put off tapping into your Social Security benefits.
The longer you can put off filing for Social Security benefits, the more you’ll end up receiving. That’s because while you can apply for benefits as early as 62, your monthly payout will be reduced by as much as 25% for life.
And if you can wait until 70 to claim delayed retirement benefits, you could receive up to 8% more.
Working with a professional financial adviser can also help ensure your finances are in order and you’re on track to enjoy the lifestyle you want while also preparing for the uncertainties of old age.
What about those already retired who are dealing with debt?
Although retirees in general deal with less debt than everyone else, they were hit especially hard by the pandemic.
The average retiree took on an additional $9,779 in debt in 2020, increasing their debt by 104%, according to the State of Retirement Finances: 2021 Edition report from Clever Real Estate.
Much of that debt is being carried on credit cards, with retirees accounting for a 48% jump in their total credit card debt between 2019 and 2020, based on findings from the Federal Reserve.
To ensure you’ll have a stress-free retirement, you’ll want to pay down debt, including clearing any mortgages or loans you’ve taken out against your home’s equity.
How to crisis-proof your retirement plan
Americans 65 and older spend on average $46,000 a year, according to the Bureau of Labor Statistics.
But Americans' median savings is just $144,000, according to research by the Transamerica Center for Retirement Studies. That’s only enough to get you through about three years.
Whenever you plan to retire, you have some options to build up your savings to ensure you have enough to live comfortably in your retirement.
Make savings your policy. The older you get, the more imprtant health coverage becomes. So in the years before you turn 65 and become eligible for Medicare, make sure you shop around and get the cheapest possible health plan. And don't forget to knock down your homeowners insurance bill by the same method.
Get a better rate with a refi. Pay down your home loan sooner by taking advantage of today’s low mortgage rates. Across the country, 11.1 million homeowners could save an average $277 a month through a refi, according to mortgage data and technology provider Black Knight.
Invest like a pro for pennies. Don’t just stick your money in a savings account and hope for the best. Download a popular app that allows you to invest your "spare change” and turn your pennies into a diversified portfolio. When you’re ready to retire, you’ll have some tidy profits you can rely on.