Should I Retire In The Middle of a Pandemic?
Planning for retirement can be both exhilarating and scary at the same time. Living a worry-free retirement requires a combination of a robust investment portfolio, liquid assets, potential annuities and social security income. 
At the beginning of 2020, no one could have imagined the sudden economic downturn caused by the coronavirus pandemic. Market volatility has naturally made many people consider postponing retirement plans because of sudden drops in the stock market that have increased investment uncertainty in retirement accounts.
As people everywhere analyze retirement accounts and their overall financial livelihood, it's essential to avoid making rash judgments regarding pulling money from investment accounts and undoing any significant life decisions.
Depending on your financial situation, you may still want to continue contributing to your 401(k) account, even if you are close to retiring. If you are employed and your company's matching program is still in place, then it's critical to continue to maximize that value for as long as you can.
Reflecting on all pertinent data points as you decide whether or not to move forward with your retirement is vital. Raiding your retirement accounts in order to convert funds to liquid assets is not the right solution.
But the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has two 401(k) provisions that cover emergency withdrawals and eliminates the 10% early withdrawal penalty if under the age of 59 1/2. The special regulations under the Act also stipulate that one-third of the money withdrawn will be included as income taxes for three years unless otherwise elected.
The CARES Act also allows you to pay back withdrawn funds from your accounts if you're able to do so.
Choosing when to retire is already a difficult decision, and sorting out myths versus facts about retiring early, retiring in general, or retiring during a pandemic is where your decision-making process should begin.
Early retirement might be the right decision for you if you are financially ready to do so, which means that you have enough liquid assets that will carry you through market volatility. If your job impacts your health and well-being and you are financially secure, then now may still be an excellent time to move forward with your retirement plans.
The pandemic has made people take a closer look at their entire retirement strategy and make much-needed adjustments. The risk in retiring early occurs when a financial plan that clearly plots out a potential 30+ year retirement isn't in place.
Early retirement will also reduce your social security benefits (if you file at retirement) because social security disbursements are calculated by your highest 35 earning years. If you work less than 35 years, any absent years under 35 will be calculated at zero.
Common Pre-Retirement Fears
Being studious and smart is very different than falling into common myths and fears that are out there, such as:
- Waiting to put money away until it's comfortable to do so (after paying off mortgages or other big bills).
- Depending solely on company-provided retirement and social security.
- Relying on lump-sum payments like an inheritance or winnings.
- Only investing in ultra low-risk investments.
- Ruling out phased retirement.
- Withdrawing money from your retirement accounts in order to convert to liquid assets.
Finding a footing that's grounded in facts that can help you forge your path forward can be a very difficult decision to make in a period of considerable uncertainty.
One of the top retirement fears that have been exacerbated by the pandemic is the fear of investment loss. There are still many unknowns ahead, and how much/how quickly the stock market will bounce back is yet to be determined.
Experts recommend giving portfolios some time to recover, if at all possible. For those who decide to retire sooner than later, giving yourself as much of a financial cushion as you can that will provide you with at least a year's worth of cash to live on is a smart choice.
Most people that are planning to retire worry about running out of money and the financial impact of a significant health event. Looking into long-term care plans may help to avoid the financial ramifications of this type of occurrence, and a financial advisor can help to create a fiscal strategy that will give you peace of mind.
Seniors should also consult with their financial advisor if there are any doubts about retirement stability. Eliminating unnecessary expenses, asset reallocation, tax-loss harvesting, or refinancing could help protect your assets and give you confidence in moving forward with early retirement plans.
Making the Right Decision for You
Facts should guide you in nailing down the best way forward. If you have the financial ability to begin a worry-free retirement immediately, then it might be wise to do so.
Another component to consider is if retirement life is what you want right now. Utilizing this time of low-activity to create a simulated retirement experience will help you to visualize if this is really what you want to do right now.
Semi-retirement is always an option if you don't feel like you want to take the full plunge. A simple self-assessment can help you decide whether or not early retirement is right for you.
- If I retire now, would my standard of living have to change?
- Do I have a plan B?
- Is semi-retirement an option?
- If necessary, is downsizing in order to achieve my financial goals while in retirement an option?
- Can I currently envision my life in retirement and how I would structure my time?
If the answer to these questions is a clear and undefeated yes, then you just might be ready to retire now.
How to Find a Qualified Financial Advisor that can Help
A qualified financial advisor can help you make the right decision about your future, navigate times of financial uncertainty, and shift your strategy. The right financial advisor that will fit your needs should specialize in retirement income planning and have credentials or certifications such as a Certified Financial Planner (CFP), Professional Financial Specialist (PFS), or a Chartered Financial Analyst (CFA).
Keeping in mind how financial planners are compensated is also helpful. The goal is to work with someone that you can trust who will also be unbiased in helping you make financial decisions.
A fee-only advisor is someone who is compensated by clients instead of through product-specific commissions. Commission-based and fee-based advisors may also be a good fit for you, but it's important to know how potential compensation structures may work in your best interest or against it.
Be sure to ask lots of questions, cross-check information by verifying credentials online and check for any complaints or suits filed against the business. Putting together a specific list of interview questions and scenarios will maximize your interview time and never commit to working with an advisor before completing a full vetting process.
Proceed with tremendous caution if you cross paths with someone that wants private custody of your assets versus investing through a reputable firm.
Where to Invest Right Now
The commercial real estate market is reeling from the massive drop in sales. Brick and mortar locations are closing at a rapid rate, and the full impact on commercial real estate is yet to be known before it hits rock bottom.
On the other hand, rental properties is an area that is flourishing despite the pandemic, and could be a prominent addition to your investment portfolio. Single-family homes with backyards and home offices are increasing in popularity as people are choosing to hunker down for the long haul of being at home and are growing accustomed to doing fewer extracurricular public activities.
Approximately nine hundred and eleven million acres of farmland are currently feeding America today, and the farming industry has been a thriving region of the economy that is continuing to expand.
Many investors choose to invest in farmland because of its consistent history in producing returns. Hunting down farming equities, commodities, farming mutual funds, ETFs, or REITs are also hot areas that investors can currently take advantage of.
If you have available cash, paying off your home is also an excellent way to prepare for retirement. One component to consider before doing so is, if you are preparing to retire, having liquid assets at your disposal is vital. If you want to preserve your cash flow, then refinancing your home might be a better solution for you.
Live For the Day
It's critical to keep in mind that the world will get better, and progress is being made to restore a healthy and safe normality for people across the globe. Doing your best to stay active, happy, and healthy while also being vigilant will help you to hold on to your peace of mind while waiting for the right time to act. Whether you choose to retire now or later, make sure to enjoy the warm summer weather and the time that you have today to enjoy life.
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