August 27, 2020
August 27, 2020
There is a lot of talk these days about the “new normal,” which might be more accurately described as not normal. COVID-19 has impacted many aspects of our daily lives and if you’re nearing or in retirement, you may be wondering if it will impact your retirement plan. Below are a few items to consider as we navigate these uncertain times.
Given the market volatility that has accompanied the pandemic, retirees and pre-retirees should take sequence-of-returns risk into consideration to help preserve their portfolio’s value and ability to recover from a downturn. Sequence-of-returns risk refers to the possibility that you’ll have to withdraw funds at the same time your portfolio is losing value. Because you have to sell more shares to get the same amount of cash, you’re left with fewer shares to compound in the future.
You can reduce the impact of sequence-of-returns risk by reducing your withdrawal rate during a downturn and focusing the withdrawals you do make on cash and other less-volatile assets.
For the second year in a row, the IRS has increased contribution limits for 401(k)s by $500, allowing you to contribute up to $19,500 in 2020, and $6,500 in catch-up contributions for investors age 50 or older. You can also contribute $6,000 to an Individual Retirement Account (IRA), and an extra $1,000 in catch-up contributions if you’re age 50 or older.
Meanwhile, the new CARES Act allows for waivers on required minimum distributions (RMDs) for 2020. This means retirees can keep their investments in the market longer, potentially increasing their value over time and avoiding the withdrawal of funds during a low point in the market.
Review both of these changes and determine if you can use them for your advantage.
COVID-19 has increased uncertainty across all aspects of life, highlighting the importance of planning. After ensuring your assets are secure, it’s also important to make sure those assets go where you want them to, whether to your family, your favorite charity or both.
Estate planning can help organize things during both life and death. Take steps to make sure the needs of you and your loved ones are secure.
Tips: Meet with an estate-planning attorney to…
Companies are focused more than ever on making it easier for you to manage your finances virtually. Many transactions that used to require an in-person visit — such as check deposits — can now be completed through your mobile device.
There are also virtual options for financial planning including online tools, consultations by phone and video appointments. If you don’t have a financial plan, consider one of these options to help establish one. If you have a plan in place, this may be a good time to review or update it, especially if you’ve had lifestyle changes or unexpected expenses.
Are you looking to start saving for a car, house, or rainy day? Check out our savings accounts that can help you get there.