Three ways to pre­vent the pan­demic from spoil­ing your re­tire­ment – when­ever it is

The Dundalk Eagle - - BY THE PEOPLE - By AL­BERT LALONDE

The pan­demic has brought the pos­si­bil­ity that some older work­ers will have to re­tire sooner than they planned.

One fac­tor is that peo­ple 65 and above are con­sid­ered to be among the high­estrisk groups for se­vere ill­ness from COVID-19. Thus, as the econ­omy opens back up, baby boomers in par­tic­u­lar are think­ing twice about re­turn­ing to of­fice en­vi­ron­ments that could ex­pose them to an in­creased risk of con­tract­ing the dis­ease.

And while in some cases re­tire­ment de­ci­sions will be vol­un­tary, re­tire­ment may be es­sen­tially de­cided for some older work­ers due to jobs be­ing elim­i­nated as strug­gling com­pa­nies re­struc­ture.

One re­port showed re­tire­ments of peo­ple from 50 to 65 and over have surged be­cause of the pan­demic. Medi­care el­i­gi­bil­ity start­ing at age 65 and full So­cial Se­cu­rity ben­e­fits soon there­after be­come eco­nomic in­cen­tives.

But as we know, it takes a lot more than gov­ern­ment aid to get us through the re­tire­ment years. And for older work­ers who planned to work long enough to col­lect full So­cial Se­cu­rity ben­e­fits but in­stead re­tire ear­lier, that could have per­ma­nent fi­nan­cial con­se­quences.

Filing at the ear­li­est age of 62 will get the re­tiree only 75% of their an­nual full ben­e­fit.

Whereas ev­ery year you de­lay filing for So­cial Se­cu­rity past full re­tire­ment age brings an ad­di­tional 8% un­til you turn 70.

Peo­ple of­ten keep work­ing as long as they can so they can con­tinue to add to their re­tire­ment sav­ings while also ben­e­fit­ing from em­ploy­er­sub­si­dized health in­sur­ance. Many older work­ers from the 40s on up think they will need to work longer be­cause of the cur­rent eco­nomic cri­sis.

But due to the pan­demic, we seem to have less con­trol over length-of-ca­reer con­sid­er­a­tions than ever be­fore. And be­cause of that, it ups the ante on tak­ing care of your re­tire­ment funds in ad­vance of re­tire­ment, and know­ing ways to grow them and bal­ance the risk to them.

When try­ing to fig­ure out how to pro­tect your re­tire­ment port­fo­lio in the un­cer­tain months ahead, re­mem­ber that some­times, try­ing to save your­self from fu­ture mar­ket volatil­ity can re­sult in ma­jor in­vest­ing mis­takes. Here are some ex­am­ples to avoid dur­ing this re­ces­sion:

Be­ing too con­ser­va­tive. Find­ing a foothold for fi­nan­cial sta­bil­ity is on many peo­ple’s minds given these ner­vous times, but sta­bil­ity can be taken a bit too far. For ex­am­ple, fo­cus­ing al­most ex­clu­sively on fixed-in­come in­vest­ments lim­its your growth po­ten­tial.

They won’t match the growth of eq­ui­ties when the econ­omy re­bounds. One rule of thumb: the ma­jor­ity of those not yet re­tired should put at least half of their port­fo­lios in eq­ui­ties, and the younger one is, the higher the per­cent­age of eq­ui­ties.

You can re­duce risk and achieve sta­bil­ity by im­prov­ing the qual­ity of your eq­ui­ties, such as those with well-re­garded man­age­ment and con­sis­tent cus­tomers, and those that have paid div­i­dends over a long pe­riod.

Ceas­ing to in­vest. While some com­pa­nies have paused match­ing em­ployee 401(k) pro­grams due to the pan­demic, it’s not out of the ques­tion that they’ll one day re­sume when a re­cov­ery en­sues.

But no sav­ing plus no in­vest­ing equals putting your­self much fur­ther be­hind for re­tire­ment. If you can af­ford to con­trib­ute to an IRA or 401(k) dur­ing the re­ces­sion, do it. Sus­pend­ing your in­vest­ing be­cause of con­cerns that your po­si­tions will lose value is a back-slid­ing strat­egy that can bite you.

As the econ­omy climbs back, share prices in­crease, but if you sat on cash while wait­ing for a re­cov­ery, you won’t ben­e­fit from the up­swing. And later on you’ll pay higher prices for those shares, when you could have got­ten them for less.

Try­ing to time the mar­ket. Bas­ing in­vest­ment de­ci­sions on cur­rent mar­ket con­di­tions is tricky. Some peo­ple are mak­ing those kinds of de­ci­sions, such as sell­ing off or paus­ing con­tri­bu­tions, to pro­tect them­selves from fu­ture mar­ket de­clines. But for ex­am­ple, when de­cid­ing to liq­ui­date, you later may have to decide when to rein­vest.

Will that tim­ing al­ways be good? No. Even profession­al fund man­agers have dif­fi­culty tim­ing the mar­ket. So it’s bet­ter to re­mem­ber that you got into the stock mar­ket in the first place be­cause, over long pe­ri­ods, his­tory shows it of­ten trends up. Don’t re­act to what’s hap­pen­ing to­day. Stick to a con­sis­tent sched­ule of in­vest­ing. And re­mem­ber: long-term growth helps fund your re­tire­ment. About Al­bert Lalonde Al­bert Lalonde, a fi­nan­cial planner and in­vest­ment ad­vi­sor rep­re­sen­ta­tive, is the founder of Kaizen Fi­nan­cial Group (www.kaizen­fi­nan­cial­group.com). Lalonde, a fidu­ciary, was in­spired to en­ter the fi­nan­cial in­dus­try af­ter watch­ing his par­ents nav­i­gate their own re­tire­ment with no one to prop­erly ad­vise them.

He has passed the Se­ries 65 se­cu­ri­ties exam and holds an in­sur­ance and health li­cense. Lalonde grad­u­ated from Mon­tana State Uni­ver­sity, from which he earned two Bach­e­lor of Arts de­grees.

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