Even in “normal” economic conditions, preparing financially for retirement can be challenging. There are many factors to consider, such as stock market volatility, interest rates, inflation, and the probability of high healthcare costs.
So, when the global health pandemic initially hit the U.S. hard in early 2020, there were several ways it impacted retirement – both for current retirees and those who were still working and investing for the future. However, the way it affected different groups of people was not the same.
For instance, according to PEW Research, the COVID-19 pandemic’s economic consequences differed, with the unemployment rate for workers age 65 or older peaking at 15.6% – the highest rate ever recorded for this group.
This surpassed the unemployment rate for those who were between the ages of 25 and 54 by 3% – also the largest gap between these two groups. But what do these figures really mean – and how could a comeback of COVID (or a similar variant) impact future income in retirement?
Will Retirement Plans Stay the Same with a COVID Resurgence?
The PEW Research study also found that during the first round of COVID-19, some older Americans opted to delay their retirement. In addition, some of those who were retired before the initial Coronavirus pandemic hit – due in large part to layoffs or health issues – incurred some struggles, leading many who are nearing retirement to consider a delay.
In this case, 34% of those between the ages of 68 and 70 now plan to move back their retirement date, and 26% of those ages 70 to 75 who are still working now plan to continue working for a longer period of time before they make the move to becoming a full-fledged retiree. Interestingly, having more money saved did not reduce the likelihood that individuals will delay their retirement.
On the other hand, while a survey by the National Institute on Retirement Security found that about half of Americans are now more concerned about their retirement security due to the COVID pandemic (both in 2020 and 2021), and are considering working longer, the health crisis has also reminded people that life can be shorter than anticipated. So, in some instances, it has actually triggered a desire to retire earlier than initially planned.
In any case, a steady, reliable, and ongoing stream of retirement income will be necessary. And, while the U.S. has been in the midst of a historically low-interest rate environment, as well as dealing with a volatile stock market, there are ways to ensure that income will continue for as long as you need it to. One way is through an annuity.
How to Make Sure that Your Retirement Income Lasts
Annuities are designed to pay out ongoing income – either for a set time period, like 10 or 20 years – or even for the remainder of your lifetime, regardless of how long that turns out to be. With a fixed or fixed indexed annuity, the amount of that income stream is known, no matter how the stock market or interest rates perform. This income certainty can allow you to worry less – even during global health pandemics like COVID-19 – and instead focus on other more important things.
Even if you are still in your working years, adding an annuity to your overall retirement plan can be beneficial. It can also provide you with some nice tax advantages, like tax deferral of the gains on the funds in the account. And, unlike many other tax-advantaged savings plans like IRAs and employer-sponsored retirement programs, there are no annual maximum contribution limits with an annuity.
Ready to Lock In a Known Amount of Retirement Income in any Market Environment?
While the initial and subsequent health crises in the U.S. have had an impact on retirement for many individuals and couples, it is just one of many factors that need to be considered. In addition, not all retirement planning strategies are right for everyone across the board. With that in mind, even when (or if) we get settled into a “new normal”.