As we all know, the coronavirus pandemic has caused everyone to reevaluate their daily routines. The way of life that we used to know when going to the grocery store, visiting family, and even going on vacation has drastically changed, and so have your finances!
When thinking about your financial future, it is always beneficial to be proactive and ahead of the game. With the pandemic still in full swing, it may be difficult to think about the future and your retirement. If you would like to learn how COVID-19 has had an effect on your retirement plans, keep reading!
1. Early Withdrawals
1. Early Withdrawals
The CARES Act allows Americans to make penalty-free withdrawals of up to $100,000 from qualified retirement accounts in 2020. This includes 401(k)s, 403(b)s, IRAs, and more. These coronavirus-related distributions can provide relief if you’ve experienced financial hardship due to the pandemic.
However, withdrawing retirement funds early should be a last resort. These funds are meant for your future and early withdrawals can severely damage your nest egg’s growth potential. Before taking action, consider these tips:
- Explore other options first like unemployment benefits, loan modifications, credit card relief programs, etc.
- Consult with a financial advisor to discuss your unique situation. They can help you minimize long-term impact.
- If you must make a withdrawal, take only what you absolutely need. The CARES Act allows 3 years to pay taxes owed on withdrawals.
- Have a payback plan to replenish withdrawn funds over time, like setting aside a portion of stimulus checks.
- Understand how it may affect your tax situation – withdrawals are taxed as income over 3 years.
While penalty-free withdrawals provide relief, they can seriously derail retirement plans if not approached carefully. Seek professional advice to make the best decision for your situation.
2. Retire Later
With the pandemic, millions of Americans have lost their jobs and businesses. The markets fluctuated heavily over the first few months of the pandemic.
This has caused many Americans that were close to retiring to have to put their plans on hold. Millions of Americans have been laid off as a result of the COVID-19 pandemic, meaning their retirement savings are either being tapped into or put on hold, as not having a job puts a halt on your retirement contributions.
3. Meet with an Advisor
No matter your financial situation, it is always recommended to meet with a financial advisor. The effects of COVID-19 have taken a toll on everyone, especially financially. Plotkin Financial Advisors is happy to help you navigate the rest of your financial journey during these trying times.
There are numerous benefits to meeting with one of our certified financial planners, such as a comprehensive understanding of your needs for your financial future, as well as determine what is needed to enjoy the fruits of your labor the way you want to.
Your retirement plan might not have been a huge aspect of your life prior to COVID-19, however, it is in your best interest to have your finances evaluated and outline your financial future as you continue to approach retirement. Retirement is something everyone wants to enjoy, so why not be proactive? Give us a call today at (301) 907-9790. Let’s plan – together, reach out today.
Sources:
https://www.igrad.com/articles/how-covid-19-may-impact-your-retirement-savings
