The coronavirus outbreak and the economic downturn that it helped trigger have created fresh concerns for investors in their prime earning years or nearing retirement. Given all the uncertainty, many may now wonder about their ability to create a financially secure retirement.
First, know that it’s normal to feel a nerve-wracking pull between the needs of living your life today and accumulating sufficient wealth to be able to retire on your own terms. “Thinking about how much income you’ll need can be very daunting,” says Tracie McMillion, CFA, Head of Global Asset Allocation Strategy at Wells Fargo Investment Institute. That said, you may want to take steps to create a plan to reduce the stress you feel about retirement, as chronic stress can increase your risk for long-term health issues, including heart disease and diabetes.
Plus, now may be a good time to take action simply because many of us are already in a change mindset. “Human beings don’t like to change their behaviors,” says Martha Deevy, Associate Director and Senior Research Scholar at the Stanford Center on Longevity. “But let’s learn from recent changes made in many financial security and retirement readiness programs, and think about how we can use ‘defaults’ and planning ahead to help positively change our overall well-being, including our health and financial well-being.”
Here are five ways to get there.
1. Don’t wait
If the recent upheaval has you questioning your ability to meet your income needs, consider discussing it with your financial team now and take immediate action. You may want to consider if you have opportunities to take capital losses to potentially lower your tax bill, and this may also be a good time to revisit your regular expenditures. Developing a clear plan in light of current circumstances can help you increase opportunities available to you as you work toward retirement.
2. Rethink retirement income
When interest rates are high, many retired investors look to bond portfolios to generate income. But with sustained low interest rates, you may need to consider other avenues if your goal is to accumulate wealth for retirement or if you are already in retirement.
“Sometimes, fear of risk makes people too conservative with retirement savings,” McMillion says. “You don’t want to lose what you’ve worked so hard for.” But a portfolio that relies solely on fixed income may not be able to keep pace with inflation. “Talk to your investment specialist to determine which strategies align with your specific needs.”
3. Involve your family
Take advantage of opportunities to talk with your family about finances. If your children are young, today’s uncertainties can be a way to explain both why it’s so important to save for the future and the fact that sometimes short-term sacrifices are necessary to meet goals. Understanding the family’s financial realities may help lower everyone’s stress levels when you have to put in extra hours at work. Having regular conversations about budgeting and investing means your children should be well informed as they mature and more prepared for their own financial futures.
4. Take care of your health
Neglecting healthy habits not only interferes with your quality of life, but it can also make your post-retirement health care costs skyrocket. Treat your body right by eating a nutritious diet, exercising most days, maintaining a healthy weight, staying in touch with your physician to discuss next steps for any medical checkups and vaccinations.
5. Think beyond dollars
Investing cash during your prime earning years is important for helping reach your retirement goals, of course. But it’s also essential to plan in a more holistic way, by thinking about the groups, organizations, and activities that help bring meaning to your life, and how you can continue to stay connected with them. “We know that social engagement has a significant impact on lifetime health outcomes,” Deevy says. “People need meaning and purpose.” Americans are learning new ways to find those things in this time of dramatic change, from attending worship services by teleconference to spending more time gardening and cooking at home. These habits could be ones you enjoy keeping for the rest of your life.