Ideas To Increase Financial savings As COVID-19 Forces Individuals Out Of Retirement
The rise of COVID-19 is undoubtedly disrupting the lifestyle of many Americans, including those who are already retired.
A new survey found amazing new insights into how seniors are affected by the pandemic. Note that around one in five retirees have worked part-time, including 9% who were forced into these roles due to the crisis. About 60% say they have difficulty getting basic necessities, including medical bills (47%), groceries (43%), and credit card bills (37%). One in four fears that they will survive their savings.
This is one of the discoveries in State of Retirement Finances: 2021. The research was conducted by Clever, a real estate education platform for home buyers, sellers, and investors. A total of 1,500 Americans were interviewed about their retirement funds, debt, and financial worries in October and November 2020. Ten percent of those polled were African American.
The impact could potentially be far more disastrous for retired African Americans, largely because they are traditionally more affected by disastrous events than other groups.
Francesca Ortegren of Clever, the report’s lead researcher, says unfortunately retired black Americans are less secure than white retirees because of lower wages, higher housing costs and less home equity, they accumulate fewer wealth over the course of their lives.
As a result, black retirees tend to be more reliant on Social Security income to cover expenses during retirement than white retirees. “While this may be fine for now, there is growing concern that when many younger Americans retire, social security may not be in place, which could further affect blacks’ ability to live comfortably in retirement,” Ortegren says .
Another report, the most recent Survey on Home Security in Retirement, found that most workers and retirees are from cautious to pessimistic about the economic outlook for 2021. Around 75% are concerned about how the global pandemic could affect their retirement savings. And they cite health and financial security as their top priorities this year.
Much of the alarm is being triggered by forces like rising unemployment and concerns about how long the pandemic economy will last. These developments have made millions of Americans – including blacks – more concerned about their retirement prospects than in previous years.
In addition, many retirees face conflicting challenges. On average, they only have pension funds of $ 178,787 – just 39% of the expert recommended $ 465,000. And they hold nearly $ 20,000 in non-mortgage debt, with their debt more than doubling in 2020, according to the Clever report. Only 35% of retirees feel ready to retire. 59% say they retired earlier than planned, including 65% due to health problems and 22% due to job loss.
Due to poor retirement savings, many retirees rely on Social Security Income (SSI) to pay for their expenses. About 60% of the household wealth of older adults comes from social security. That’s not ideal when you consider that SSI averages only about $ 1,514 per month – much less than the typical monthly spend of about $ 3,900.
The collapse of retirement can also affect family heritage. About 28% of retirees say they don’t have enough money to pass on, while 29% pass on what they have but don’t just save to do.
Still, there is some good news in the pension report. Despite financial regrets during their working years, 42% of retirees believe that their retirement is and will remain more comfortable than their parents’ retirement.
Another encouraging sign is that younger Americans are better off saving for retirement. The average non-retired respondent said they were saving around 10% of their income for retirement, and other sources suggest that younger generations started saving earlier than current retired workers.
Ortegren by email BLACK COMPANY Some tips for those looking to work and increase their retirement savings:
- Prioritize retirement planning now.
- Even small savings add up if you start early enough. If you start saving for retirement earlier, you can invest less in retirement each month and still have more assets by the time you retire than if you had waited. Many people have debts that they want to pay off before saving for retirement, but it makes sense to prioritize both instead of one or the other.
- Consider riskier investments when you are younger. Research suggests that black Americans are less risky (especially avoiding stocks) when it comes to their retirement portfolio, which could be one of the factors prohibiting building enough savings for a comfortable retirement. Risky investments can be daunting, but they also offer the possibility of higher returns. If possible, speak to a financial advisor to assess your risk comfort and get advice on your 401 (k) portfolio.
- Use 401 (k) if your employer offers it. These plans are pre-tax so the money that comes in will not be taxed until later. This can help you raise more money over time.
- Try to contribute at least what suits your employer (if your employer pays a contribution) so you don’t miss out on that money. For example, if your employer hits up to 5%, try to deposit at least 5% into your retirement account. That is essentially free money that you would otherwise be missing out on.
- Consider saving additional discretionary income in a Roth IRA. The money that goes into this type of account is after-tax income, but you do not have to pay tax on any Roth IRA account profits.