The world has come to a complete halt after the recent outbreak of the Corona virus pandemic. Although it has been a mere 4 months since it all started back in Wuhan, China, life as we know it seems to be a distant memory that we can only reminisce about at the moment. This virus sees no age, race, or gender, and infections are moving like wildfire across the globe. However, it does seem to affect the elderly and those with compromised immune systems harder than any other group. This means that we should rightfully be worried about parents, grandparents, and retirement.
When governments first urged people to stay home, it was not solely about the young and healthy. They were more concerned about the fragile among us. Add to this physical danger all the uncertainties and the financial crisis that is bound to hit the global economy, people around the world are trying to figure out ways by which they can make sure they are able to sustain their livelihoods. Especially since no one knows how long this situation of global lockdown is going to continue, everyone needs to make sure they have a financial contingency plan in place.
The retirement plan is one of the financial tools people are looking to nourish and integrate. Now more than ever, every working adult, regardless of their age, needs to consider what needs to be done when it comes to retirement plans amid the Corona virus crisis. If you are not sure about what you should do with yourself, read on for some eye-opening ideas.
What is a Retirement Plan?
You first need to understand precisely what retirement plans are. The idea behind retirement plans is to allow people who have been working for a lifetime to be able to set aside a decent amount of money that will work as a source of income when they reach the age of retirement. Young professionals who are just starting their careers are more aware of the importance of having an adequate retirement plan, forcing employers to get more creative and generous with their retirement options to attract the best calibers out there. Especially amid the Corona virus pandemic that the world is fighting, people are becoming more anxious to protect their savings, in case the situation gets even worse, and they are laid off.
Having a retirement plan in place will help you restore your previous financial state more efficiently once the storm passes than you possibly could without a plan. There are different types of retirement plans. The most popular and basic one is the pension, especially in the governmental sector. Pensions are financial funds where employers make a contribution on behalf of an employee throughout their working life. Once the employee reaches retirement age, they get to access their pension to finance their post-employment lives.
The main problem with this kind of retirement plan is that it does not account for the inflation rate, and the amount accumulated over the years stays the same. People who choose this plan will find it unreliable during these times since the virus is disrupting the world economy, and prices might drastically increase as the supply is stifled, unable to fulfill the demand for products and services. However, it is worth mentioning that state pensions are unaffected by the crashing stock market. This is just an example of how the current pandemic will have a significant impact on what you should do in regard to your retirement plans. It is now time to move on to what you should actually do.
Do Not Tap into Your Retirement Plan Unless You Have to
The first and most important thing you need to avoid is cashing in your retirement plan. Many people – understandably – will give into panic and decide to make uneducated rash decisions to liquidate their retirement plans, in case the economy collapses, and they end up with nothing. However, as difficult as this might be, you need to adopt a less skeptical approach. Leave your retirement plan untouched as you will be glad you did when this is over, and you can pick up from where you left off, nurturing your intact retirement fund.
In Fact, Invest More in Your Retirement Plan
Since we are living in unprecedented times that are affecting all communities, most employers are trying to support their employees in any way they can. You need to discuss with your employer whether you have an option to move into a more lucrative retirement plan that would be more meaningful in today’s world. You do not need to fear to invest further in your retirement plan, as this will actually mean that you get to benefit from greater tax relief on the money you are saving for retirement.
Do Not Take Financial Advice From Just Anyone
As if the dangers of the Corona virus are not troubling enough, we are bombarded with fake news and false information everywhere we turn. Social media has become both a blessing and a curse during such hard times. On the one hand, it provides the distraction and entertainment you need while you are staying at home. However, on the other hand, it is encouraging the manifestation of misleading data and giving a platform to anyone to step up and give their two cents’ worth about what people should do during this crisis. It is better to refrain from following mass media hypes and keep in contact with your own financial advisor. You are also recommended to stick to reliable and trusted international financial institutions as well as local ones. This is when you should get your financial advisor, especially as this is an exceptional time where even globally renowned economists are uncertain as to how to best approach it.
Do Not Undersell Your Stocks
If, like many people, you trade in the stock market and direct profits towards your retirement plan, do not be alarmed by the downturn that the market is taking place at the moment. It is understandable and even expected that the market will crash as it does typically during times of uncertainty as investors submit to panic trade, affecting the value of the most successful of shares. You might feel tempted to get rid of your shares that are rapidly losing their value before they hit rock bottom. However, you need to understand that this is not the best course of action. You will be sorry you did so after the spread of the virus is contained, and the market goes back to its previous condition or even better, as we have seen during previous recessions. You need to hold on to your stocks and not undersell just because people around you are doing so because they too do not know what to do and are caught in a state of hysteria caused by the troubling news from around the world.
Stop Checking Your Account So Often
This is the time to trust yourself and your financial advisors’ judgment and let your retirement account be. The more frequently you look at it and notice how its value is diminishing, the higher the chances are that you will get flustered and resort to extremely rash measures. You need to be realistic about the short-term losses you are going to incur during the Corona virus mania. It is simply one of the many aspects of our lives that will be impacted, maybe even forever changed by this outbreak. The best thing you can do is to go about managing your finances in the same way you used to while seeking knowledge about how to turnaround your losses into profits in the future.
Scammers will become particularly active during this time of heightened anxiety in the international community. Unfortunately, many people will fall victim to scammers aiming to feed off the collective panic when it comes to something as sensitive as finances. You need to be extra careful to avoid being tricked into financial agreements with any agencies or fake advisors who claim to have “special funds” that are safe enough for you to redirect your retirement savings.
Use sound judgment; doing quick research will almost always help you uncover an impending scam. If you find yourself in a compromising situation with a possible scammer, reach out to local authorities and report to save other potential victims. In all cases, do not share any personal information or open any links in emails or text messages from shady sources. Remember that this is the time to listen to the financial experts you trust and follow advice from legitimate financial institutions in your country as well as international ones.
If You Have the Option, Delay Your Retirement
If you are at a near-retirement age and had a clear plan as to when exactly you wanted to retire, you might want to reconsider. Although it is hard to foresee the exact impact the Corona virus pandemic will have on the economy, it is clear from the floundering markets that there is going to be tons of money lost until then. If you live in a county where you have the option to push your retirement a year or two, then do so. Apart from disturbing your retirement dream that you were eagerly looking forward to, you have nothing to lose and everything to gain. Working for a few more years will give you the chance to pump life back into your retirement savings account and will make you look forward to retiring during better times than the ones we are witnessing. If you are still not fully convinced, think of the ultimate retirement vacation you have been looking forward to throughout your adulthood – after the virus containment and when it is safe enough to travel, you will still be able to enjoy it and fulfill this dream.
Make Sure You Have Enough Cash
Unlike normal days, you cannot depend on credit cards and other financial tools to finance your daily needs during this crisis. You have to make sure you always have enough cash to afford your daily needs and cover monthly expenses. You might not see the need for it. However, neither you nor anyone can anticipate how the situation will evolve. Although unlikely, your bank accounts might become inaccessible. Even if that should happen for only a few hours, it is not a risk that you can afford. While some might consider this unnecessary, it is better to be safe than sorry in such cases.
You Might Be Encouraged to Move Closer to Family
Aside from the financial aspect of retirement planning, you need to look at the social one. Many people decide to move to more retiree-friendly communities after they retire. Whether this means moving to different cities or different countries altogether, from the looks of it, these plans will be hard to upkeep. If you are on the verge of retiring, you are indeed reassessing your plans of moving. Given the fragility of the elderly health and how the Corona virus is a real threatening factor, you are better off considering moving somewhere closer to your family in case any emergency should befall you. This is much safer for you and easier for other family members to provide the necessary care in the smallest of ways, such as doing your grocery shopping.
As you may have noticed, regardless of which of the above you choose to follow or disregard, the common denominator is not to surrender to panic and to always stay calm. It is true that the situation is troubling, and the numbers of infections and deaths do not seem to be slowing down, so much so that some are even convinced that the world is coming to an end. However, this universal state of panic is doing more harm than good on all frontiers. By looking at our modern history, you will realize that health crises and the following economic recessions are more common than we think. Financial markets are resilient enough and somehow always make a healthy come back. So, whether you are nearing retirement, or still have years ahead, the best thing you can do is stand your ground and keep your retirement plan as is or fortify it to reap the benefits later on.
Governments and the public alike are all waiting with anticipation to see how this health crisis will pan out. It is indeed scary, and the ambiguity of it all is making it harder for everyone to understand the immensity of the situation appropriately. However, you still need to think ahead about the future and make sure you are making the best retirement decisions with the information you have today.