Round Rock Financial Planner Steve Ankerstar
Did COVID-19 Affect your Financial Situation? Time to Reassess.
All of us working together to survive, defeat and mitigate COVID-19 caused a significant financial strain on households, businesses and financial markets. It is imperative to take a hard look now at where you are financially to make sure you are still on track for your financial goals.
These five benchmarks can be useful in assessing where you are financially in relation to retirement.
- Below 40 years old –The primary goal is just to get started and make it a disciplined habit. For most, this means simply contributing to your workplace 401(k). Contributing to and then working toward maximizing their 401(k) and IRAs will secure a stress-free retirement for most people. So, start early and stick to it.
- Age 40 – You should have three times your annual income saved up. This age can be particularly difficult due to competing financial priorities. Homes, kids, college savings, nice cars, vacations, and eating out can all detract from saving and investing for your retirement. It takes prioritization during this time of your life to stay on track.
- Age 55 – You should have seven times your annual salary tucked away in retirement accounts. Obviously, you are now relying more on investment returns of retirement money saved earlier in life than you are on current contributions. That’s why who you trust with your investments is so critical. Your money must be working as hard as you are.
- Age 62 – You must make the correct decision for you and your family regarding social security. The window opens at age 62 and your health, need for cash flow, working status and several other factors go into this decision. Prioritize this irrevocable decision accordingly. Calculators are widely available but can be confusing. Seek assistance if necessary.
- Retirement age – This is different for everyone. Conventional wisdom says to have 10 times your annual salary saved up to be able to restructure your portfolio to generate significant replacement income. The good news is that more people are finding part-time “gig” work in retirement now instead of the traditional “walk away from the workforce” retirement model.
COVID-19 wreaked havoc on our health as well as finances and may have significantly impacted your financial situation. As painful as it may be, now is the time to face the new reality and adjust your plan accordingly.