The coronavirus pandemic has hit the economy hard, and people who are nearing retirement or already retired are feeling the stress.
"COVID19 has caused a lot of retirees and those approaching retirement to rethink their plan for retirement," says
"A plan created years ago may not be as effi cient when interest rates were much higher and the economy was in better shape. Stress testing your current retirement plan adapted to the postCOVID19 world can show if you're positioned to weather this storm or in need of an update."
Notchick suggests the following tips to reevaluate a retirement plan and perhaps retool it to withstand the effects of COVID19:
Take precise inventory of expenses. "Sometimes people don't realize how much they are actually spending," Notchick says. "When they lay it out, they're shocked. For accurate retirement income planning you must have good data to understand where the money goes each month everything it takes to live, plus discretionary expenses. A dollar saved is a dollar earned and is more important now that ever."
Check asset location and effects on taxes. "Tax planning in retirement is critical to understand," Notchick says. "It's about knowing how the different accounts are taxed in conjunction with other income streams like
Bridge the retirement income gap. Notchick points out the need to tailor retirement plans for the inevitable costs of aging, some health related as well. Income diversifi cation ensures a strong, wellbuilt plan. "If you have an income shortfall in retirement, where will that come from?" Notchick asks. "It may make sense to use a variety of income sources like dividends, capital gains and income from an annuity."
Reassess your risk tolerance. "Some investors may have been complacent over the past year; markets kept going up and nobody worries about markets going up." Notchick says. "COVID19 changed that, not only is there more inherent risk in the stock market, but because of the zero interestrate policy enacted by the
Ask these questions. "Does fear of loss or stability keep you up at night? At this stage of your life, how much risk do you need to achieve your goals? Failing to plan is planning for failure," Notchick says. "This applies to all aspects of life, including retirement."
"Holistic fi nancial planning for retirement ensures all parts of the fi nancial plan are working together investments, taxes, estate planning, etc." Notchick says. "The pandemic has made the picture murky for some in retirement, but an updated retirement roadmap will allow you to get to your retirement destination with clarity.