You can make your future more secure, fun, and comfortable, only if you start planning it today. One of the best ways to do so is to invest in a retirement plan. But during the coronavirus pandemic, it might get difficult for you to set retirement plans.
This is because most people are finding it difficult to set their financial goals. That’s why here, we have listed some retirement planning mistakes that most people are making during coronavirus.
The major retirement planning mistakes to avoid during coronavirus are Stalling automatic investments, Withdrawing unnecessarily from a 401(k), Reverting to cash, Not having an emergency fund, and Not maintaining a retirement plan.
We have discussed more about these mistakes in detail. To know more about it, you should read the full article.
5 Retirement Planning Mistakes To Avoid During Coronavirus
Tip: In order to plan for retirement, you can invest in various schemes including Public Provident Fund, National Pension System, etc.
Stalling Automatic Investments
If you are in a financial position and depositing your money into your retirement account, even before the global pandemic, you should continue contributing to your IRA. This is because it is essential and will help you a lot in supporting your long-term goals. Apart from it, if you manage your savings habit properly, it will encourage you more to avoid wasting the money on non-essential short-term items.
Withdrawing Unnecessarily From a 401(k)
Most people make this mistake, they withdraw unnecessarily from a 401(k) pension account, and for individuals who do this before turning 59, one-half of them generally face a 10% early withdrawal penalty. The early withdrawal from a retirement account is not right for everyone. However, if you still want to withdraw money from your pension account, you should consider talking to a financial advisor before doing so. Apart from it, the CARES Act also relinquishes the penalties during the global pandemic and allows the investors to withdraw up to $100,000 from the pension accounts.
Reverting to Cash
Reverting to cash can also be a retirement planning mistake that you should avoid during coronavirus, because, when the market dominates, you may think to sell the stock and keep it down with income in cash mode, until the economy stabilizes. But it’s not a good strategy. Scott Schlichter who is a senior financial advisor at Personal Capital as well as manager of a financial planning specialist group, also said that it might seem a good idea to take an action to prevent further losses, we also don’t know whether it will be a good decision or terrible one.
Not Having an Emergency Fund
You earn money by putting in effort and working hard. So, you should save some amount of money from your income as an emergency fund and for future purposes. Now, you can only save money if you know the importance of savings. If you don’t put some cash aside, it will become difficult for you to survive during the coronavirus pandemic. Apart from this, you can’t be able to pay your debts on time which will result in more stress. You must have enough funds so that you can cover at least six months of expenses during any economical crisis.
Not Maintaining a Retirement Plan
If you are not maintaining a retirement plan, then you are making a big mistake during this global pandemic. There are basically some major steps for retirement planning. In order to do this, you have to properly determine all of your expenses, eliminate all kinds of debts, and save money through a registered retirement savings plan.
All these are retirement planning mistakes to avoid during the coronavirus pandemic. Also, if you get any tax refund this year, try to invest it into your retirement planning.
Featured Image Credit: CNBC
What should you not do in retirement?
In case of a pandemic, if you are financially stable, you should not withdraw money from a 401(k) unnecessarily before you turn 59, as it can lead to an early withdrawal penalty. Apart from it, two major retirement planning mistakes include stalling automatic investments and not maintaining a retirement plan.
What are the five stages of retirement?
The five stages of retirement are pre-retirement, full retirement, Disenchantment, Reorientation, and Reconciliation & Stability.