Can I Still Retire? 4 Signs You’re Not Ready After COVID-19

The five to ten years before retirement are generally peak earning years for older Americans. Your take-home pay is typically at its highest, yet you likely have fewer financial responsibilities than you did in your younger years. This can be a great time to sock away as much money as you can before you transition into retirement. The Coronavirus, however, has thrown a wrench into this plan for millions of pre-retirees – whether it’s because of a job loss, reduction in work hours or even a hit to your portfolio.

This makes retirement planning all the more important.

Retirement planning isn’t a one-size-fits-all equation. Whether you can stick to your original retirement plan after this financial crisis depends largely on your accumulated wealth, family dynamics, personal goals, and legacy planning needs.

That said, here are 4 signs you may not be ready to retire.

1. you depleted your retirement savings

Millions of Americans are currently out of work, but even those who are still working may have experienced losses. Many employers have scaled back 401(k) contributions, cut pay and reduced hours.

While the federal stimulus plan has helped many stay afloat, others have had to dip into their savings to continue paying bills and making ends meet.

what to do before you retire

Ideally, you want to have 12 to 24 months of expenses set aside in an emergency fund if you’re between the ages of 55 and 65. If the Coronavirus pandemic has depleted your savings below these limits, you may need to continue working until you’ve brought these accounts back up – especially if you want to be fully prepared just in case we experience another market or financial crisis.


Concerned about your retirement plans? Contact Linscomb & Williams to see how we can help.


2. You were forced to dip into your retirement funds

Withdrawing early from retirement accounts isn’t always the best solution, but the Coronavirus pandemic has blurred the lines. Maybe you needed funds quickly to avoid high-interest debt, avoid a housing problem or meet other basic needs.

The government passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March, which allowed individuals directly affected by COVID-19 to withdraw up to $100,000 from their retirement accounts without penalty. This legislation gave some breathing room to Americans who were strapped for cash, but it wasn’t without its consequences.

Tapping into retirement funds can lock in losses and increase your tax liability, which makes it more difficult to regain your financial footing.

what to do before you retire

For pre-retirees who had to dip into these funds, the first step is to figure out how these withdrawals have impacted your retirement plan. If you qualify for a penalty-free withdrawal under the CARES Act, you could receive a tax break if you pay the money back within three years. If you don’t qualify for a penalty-free withdrawal, consult with your financial advisor to see how this could impact you when you file your federal income tax return in 2021.

As with every financial crisis our country has seen, we expect based on history that your portfolio will recover. Even if you’re 55 now, you may still have more than 20 years to watch your investments rebound. In the meantime, build up your cash reserves, so you don’t have to rely on retirement funds when the next financial crisis hits.

3. you are caring for kids again

The Coronavirus pandemic has uprooted the lives of millions of Americans – both young and old. Maybe your son lost his job so you’re sending him money to help cover the bills. Maybe your daughter moved back home indefinitely until she could safely return to school.

While there’s nothing inherently wrong with helping your kids during tough times, it does add to your monthly expenses. Moving to a fixed income in retirement could spell trouble if your budget is already strained.

what to do before you retire

Again, this is why retirement planning is important. You may have already discussed the possibility of helping your children in the future with your financial advisor. Hopefully the “what if” scenario that has come to fruition may not represent a game-changing strain on your finances. However, if you’ve found yourself caring for your adult children again and you weren’t prepared, you have a few options.

First, you could push back your retirement date until your kids are back on their feet, which will allow continued income while you’re taking on the extra costs. Another option is retiring as planned and boosting your income through a post-retirement part-time job or consulting gig.

A financial advisor can help you weigh the pros and cons of your decision and adjust your budget, if needed.

4. you now have extra debt

Debt affects you financially and emotionally. On one hand, it eats up a chunk of your take-home pay that you could be using to fund your lifestyle. On the other hand, debt can weigh on you emotionally and can even lead to anxiety, stress, fear, and depression.

Nearly 4 million homeowners have enrolled in forbearance plans with their mortgage companies, and out of the 120 million Americans who have credit card debt, 28 million (23 percent) say that they have added to credit card debt as a direct result of the Coronavirus pandemic.

what to do before you retire

Watching extra debt stack up before your eyes can be paralyzing, but the worst thing you can do is nothing at all. Call your creditors, explain your situation to them and see if there’s something they can do to help. Many businesses are waiving fees, for example, lowering interest rates and allowing customers to temporarily pause payments until the economy completely reopens.

If you’re able, put a plan in place to pay off any debt you have before you retire. If $1,000 of your monthly income goes to debt payments and you’re able to pay that off now, that means you’ll need $1,000 less a month to live on in retirement.

how to get back on track for retirement

The best way to know if you’re still on track to retire is to talk to a financial professional who can evaluate your current financial situation and help you make an informed decision about your future. Studies show that adults who work with a financial advisor feel more confident and financially secure than those who manage their finances alone.

At Linscomb & Williams, we understand the worry and frustration you feel as you prepare for retirement during a financial crisis. We’re happy to have an honest conversation about what you can do to secure your financial future. Contact us to get started.

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Carolyn Galfione, CPA, CFP®

Carolyn Galfione, CPA, CFP®

Carolyn Galfione is the Managing Director and a Senior Wealth Advisor at Linscomb & Williams.

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Investment Advisory Services are offered by Linscomb & Williams, an SEC registered investment adviser, and a subsidiary of Cadence Bank. Linscomb & Williams (L&W) provides financial planning, investment management, and retirement plan and investment consulting services. L&W is not an accounting firm, and does not provide tax, legal or accounting advice.

Information expressed herein is based upon opinions and views of L&W and information obtained from third-party sources that Linscomb & Williams believes to be reliable, but Linscomb & Williams makes no representation or warranty with respect to the accuracy or completeness of such information. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.