Pandemic takes big toll on personal finances
It's difficult to imagine that anyone has been financially untouched by the COVID-19 pandemic and economyclosing efforts to contain it. Job losses and income cuts are an obvious example, but many people will be hurt in other ways, and the impact could linger for years.
Some Americans, for example, will see an erosion in their credit scores, affecting their ability to borrow on good terms, while others could fall further behind in retirement preparedness. Income tax perils and other dangers also lurk.
With a spike in the nation's jobless rate, many Americans now find themselves pinched by lower incomes. Some individuals weren't able to build an emergency fund even when times were good. "People who were living paycheck to paycheck do not have the financial cushion to absorb a shock of this magnitude," Mckinsey & Co. said in a report.
Even before the pandemic hit, about 40% of Americans reported that they couldn't cover an unexpected $400 expense without borrowing or selling assets, Mckinsey noted, citing a widely quoted Federal Reserve study. The COVID-19 outbreak has made money issues more worrisome for people in this group.
Many unemployed individuals have become dependent on stimulus checks and expanded jobless benefits.
Losing ground on retirement
For a while, it looked like millions of investors and their 401(k) retirement accounts would get wiped out by the stock market plunge triggered by the sudden coronavirus recession and economyshutting measures to contain it. That doesn't appear to be the case anymore, with the market inching up to near its former highs. But many people still will lose ground in retirement planning.
Individuals who lost jobs, were forced to take temporary furloughs or had their 401(k) matching funds cut will have fewer contribution dollars flowing into their retirement accounts. Worse, some investors have tapped their accounts for loans or permanent withdrawals, removing money that could have bounced back with the stock market.
Then there's the lure of claiming Social Security benefits as soon as possible, for anyone who has reached age 62. People who face job disruptions might be forced into this predicament.
But the recovery has stalled. The number of passengers traveling through airports decreased more than 70% in July compared to last year, according to the Transportation Security Administration.
American has signaled it will have to reduce its payroll by 20,000 employees in the fall. Southwest won’t need furloughs this year after more than 28% of its workers had to agree to time off or early retirement to make that happen.
“Until we double our traffic, we won’t break even,” Kelly said in his message, encouraging employees to continue to volunteer for leave.
Kelly told employees the carrier is in favor of a “lift and shift” of the previous government stimulus for airlines, which allocated $32 billion in grants and loans, but also prevented airlines from furloughing, laying off or reducing employees’ salaries or hours until Oct. 1. It also contained provisions that were more restrictive on shareholders and executives, such as limits on executive pay and dividends.
The newest proposal would give airlines until the end of March to get passenger levels back to financially sustainable levels.
Barlett said it’s a good idea to let employee groups such as unions lead the campaign because they are advocating directly for workers.
Union leaders such as Sarah Nelson with the Association of Flight Attendants have been doing the public campaigning on cable news and social media, deflecting any notion that stimulus funding would be a bailout for airlines.
“An extension of the CARES Act, that’s what we are really hoping will get us through this without involuntary furloughs,” said Julie Hedrick, national president for the Association of Professional Flight Attendants, which represents about 25,000 workers at American Airlines. About 10,000 flight attendants risk being furloughed.
Southern Methodist University public relations professor Steve Lee said airlines won’t be the visible cheerleaders for this bill, but won’t hide their support either. Eventually, he said it will become public that the companies are lobbying for aid.
“Airlines are in a rock and a hard place kind of situation,” Lee said. “They certainly didn’t create it.”