RETIRING DURING A RECESSION 3 GUIDELINES FOR A MORE STABLE FUTURE
DON’T WORRY ABOUT WHAT YOU CAN’T CONTROL. Even for financial experts, the markets are notoriously hard to predict. Rather than expend energy wishing you could sway the market, focus on making changes where you have control. You can control how much risk you take, when you claim Social Security and how you spend your money, among other things. Think about how you can change these factors in your favor and don’t worry about the rest. STRESS-TEST YOUR FINANCES. While conducting a stress test might sound a little abstract, it’s something that we can do for you here at Patriot Wealth. Stress-testing your finances can help you determine if now is the right time to retire or if it’s better to wait just a little bit longer. Even if things look bad right now, that could change in a year or two. As the market recovers, so do your chances of a peaceful retirement.
A few months ago, several news sources confirmed what savvy American businesspeople already suspected: The United States is currently in a recession and has been since February 2020. While a recession isn’t good for anyone, it’s especially concerning for those nearing retirement age. Those who were planning on retiring this year might be having second thoughts — for good reason. Rest assured, however, that if you’ve had fears about retiring this year, you can still go ahead with your plans as long as you keep a few things in mind. DON’T LET EMOTIONAL ATTACHMENT GUIDE YOUR DECISIONS. Saving for retirement is almost inherently tied with joyful thoughts of financial stability in your golden years. So, when something like a recession threatens that security, it’s easy to react irrationally. Before deciding what to do with your retirement funds, make sure your decisions are rooted in logic, not fear or anxiety. If you don’t know where to start, be sure to contact us today for guidance!
SHOULD I WITHDRAW MONEY FROM MY 401(K)? T he CARES A ct O ption
This pandemic hasn’t been easy on anyone. As workers face unemployment, couples cancel weddings, and countless patients struggle with this deadly virus, now more than ever it’s important that we have the resources we need to survive. In an effort to make this possible, the IRS is offering a break. As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the IRS is allowing citizens to pull money out of tax-deferred accounts without being subject to the standard consequences. In a recent move, the IRS expanded the eligibility for this withdrawal, allowing anyone to pull up to $100,000 from their 401(k)s. Users will avoid penalties if the full amount is replaced within the next three years. However, much like any standard savings account, it’s important to evaluate if such a withdrawal is needed. Experts recommend this move for those who have been fired, laid off, or furloughed and have no safety net or job lined up. Emergency savings, budget cuts, and payment freezes may not be enough to get these workers over the hump of COVID-19. The CARES Act gives citizens this other option to manage their debt, savings, and income during this crisis. Yet, for others, this move may not be the wisest choice. Withdrawing funds from your 401(k) under the CARES Act is not advised for those who have lost their job but may have
another job lined up or can manage on emergency savings. There are many reasons for this. You could face a penalty if you cannot replace the funds in three years, and it may be very difficult to recover from this. Instead, consider the ways you can save or budget your money more effectively. Are there subscription services you can pause until you’re back on your feet? Are there items in your home you could sell? Is there a way to cut down on the number of times you order take-out? (We know. This one stings for us, too!) The bottom line is you have options. If you would like guidance on withdrawing from your retirement account during this tumultuous time, our team can guide you to the solution that will best fit your needs. Give our office a call today to set up an appointment.
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