As the COVID-19 pandemic continues to put people out of work, many Americans, particularly low income-earners are forced to change their retirement plans or contribute less. In a recent study by MassMutual, over 50% of American adults have cut their retirement contributions since March. So what are you supposed to do if your retirement savings have been impacted?
Experts warn that if this trend continues, many people will not retire comfortably or achieve financial freedom anytime soon. And the situation is already giving many sleepless nights.
According to a recent survey by the Transamerica Center for Retirement Studies, 20% of millennials, 25% of Generation X, and 32% of baby boomers expressed decreasing confidence in their ability to retire comfortably. If you're feeling this way, don't beat up yourself. It's not too late to change things.
In this blog post, we share four things you can do to catch up on your retirement savings during and after the pandemic.
Rethink Your Needs And Wants
Many people are spending less money during the pandemic than they did before. This is a great way to have nice savings to boost your retirement funds.
So if your spending hasn't changed, reprioritize your expenses. Rethink your needs and wants to reduce spending and put what you're not spending now toward the future- retirement savings.
Keep Newly Developed Habits
Apart from saving the "extras," many people are forced to stay and work from home. And a majority of us have developed new habits that have helped reduce or eliminate certain expenses. These are good habits worth keeping when this is over.
For example, many people believe the pandemic showed them how much money they can save by only leaving home for work, shopping, and socializing. And many plan to maintain these routines after the pandemic.
Other habits to consider include ride-sharing, at-home entertainment, and reducing eating out. These practices can help you save more money to increase your retirement contributions.
Get A Side Gig to Help With Your Retirement Savings
The pandemic also taught us the importance of having multiple sources of income. Many people with side gigs have done fairly well as compared to those who only relied on their jobs.
So it may be wise to get or start a side hustle to bring in extra money. Simple gigs like freelance writing, renting out your basement, selling things on eBay, or offering consulting services on your area of specialization can earn you thousands of dollars a year.
Once you start earning, resist the urge to spend the money on things you want now. Instead, carve out the majority of the income to put towards your retirement.
Save What You Can
The sooner you start saving the less you'll have to save every time to hit your retirement goals. This is because of the compounding interest rates.
For example, if you're 20 and want to have a million dollars by the age of 70, you may have to save about $400 a month now. But if you wait until you're 30, you may be forced to save about $900 per month to achieve the same goal. So don't wait. Save what you have now however much it is.
And one of the most straightforward ways to start the journey is to fund your employer-sponsored 401(k) plan. But if your company doesn't offer, look for other options such as Roth IRA.
people. And if you've been moving mountains to save while struggling financially, don't give up. The situation will come to an end soon. We hope these tips help you continue saving for your future. What other tips have you deployed to mitigate the impact of COVID-19 on your retirement savings or plans?