Have your retirement savings taken a hit recently? You're not alone in this situation. Let's explore how to boost your contributions after the pandemic.

According to new research, around 14% of Americans are now considering postponing their retirement due to the financial impacts of COVID-19. Catherine Reilly, a retirement solutions expert, highlights that the pandemic's economic effects have significantly altered the plans for many nearing retirement.

THE IMPACT OF COVID-19

When we think back to March 2020, the world faced unprecedented shutdowns. Job losses and salary cuts were rampant, leading many to dip into their retirement funds, such as 401(k)s and IRAs, just to make ends meet. Unfortunately, withdrawing from these accounts can hinder future growth and may incur penalties and taxes.

Data also shows that many chose to halt their retirement contributions during this time. Although they weren't withdrawing funds, they weren't adding to their savings either, mainly due to reduced incomes or layoffs. This decision allowed some to manage expenses without affecting their savings too severely. Surveys indicate that many who paused their contributions resumed them by late 2020 or early 2021.

LOOKING AHEAD

If you've paused your contributions, the bright side is that the long-term effects may not be as severe as you fear. It's possible to catch up on your retirement savings. Reilly advises that resuming contributions as soon as you can is crucial. If feasible, consider increasing your contribution rate to recover lost ground quickly.

If you borrowed from your retirement account, prioritize paying it back while also maintaining your contributions. Balancing both will set you on the right path.

TO DELAY OR NOT TO DELAY

With a notable portion of Americans contemplating delaying retirement, you might wonder if this is the right choice for you. Delaying retirement can effectively compensate for any shortfalls by giving you additional time to save and earn returns. It can also reduce the duration of withdrawals from your savings.

Moreover, Social Security benefits increase the longer you wait to claim them, making postponement an appealing option. The average retirement age is rising, with many now viewing retirement as a multi-phase journey rather than a single event. Considering part-time work or alternative income sources can also help ease the transition.

Ultimately, whether delaying retirement is suitable for you depends on your financial situation. Assess how much you might have lost during the pandemic and consider if working a few extra years would benefit you. Collaborating with a financial advisor can help you craft a tailored plan for your retirement future.

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