4 Problems You Could Face if You Don’t Save Enough for Retirement
It's recommended that everyone saves for retirement throughout their career. Find out how your retirement could be affected if you don't save enough.
At this point, it’s hard to ignore the fact that the omicron variant is tearing through the U.S. and contributing to a massive surge of cases to close out 2021. And many people are canceling travel plans because of it.
But what about retirement plans? Should the omicron variant — and the havoc it’s wreaking — prompt you to rethink yours?
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Potential upheaval
The omicron variant could affect the U.S. economy and stock market in several ways. If outbreaks really multiply to the point where healthcare systems can’t keep up, restrictions — at least at the local level — may ensue.
Now, we may not see the same lockdowns we did earlier on in the pandemic. But if businesses are forced to change the way they operate, it could lead to a surge in layoffs, leading to higher unemployment numbers.
That alone could cause a ripple effect. Consumers may get worried about layoffs and start spending less, leading to revenue shortages among businesses large and small. Meanwhile, investors could get antsy and start selling off stocks out of panic, leading to a prolonged downturn across the broad market.
It’s the latter situation that may have you reconsidering your retirement plans in light of the omicron variant. If you’re planning to stop working and retire, an uptick in unemployment numbers may not be all that concerning to you. But if your plan is to start tapping your retirement savings once you’ve left your job behind, doing so at a time when investment values are plunging doesn’t make for a financially sound start to retirement.
Is retiring right now risky?
It depends on your situation. If you have other sources of income to tap so you won’t lock in losses in your retirement account in the event of a market downturn, then you may be just fine to move forward with your plans. Those alternate income sources could include Social Security benefits as well as a pension you may be entitled to.
Furthermore, if your retirement savings are invested strategically, you may be fine to take withdrawals even during a stock market crash. Ideally, by the time you retire, you should have a large portion of your assets invested in bonds, which tend to be far less volatile than stocks. And so if that’s the case, then stock market volatility may not impact you so much in the near term.
Also, it’s a good idea to have at least a year’s worth of living costs available in cash as retirement nears, whether in your actual retirement plan or a separate savings account. If you have access to that money, it makes retiring a safer bet.
What’s the right call?
It’s natural to consider delaying your retirement at a time when there’s so much uncertainty. This especially holds true if your job is one that allows you to work remotely so as to not risk exposure to COVID-19.
At the same time, if you’re really set on retiring in the middle of the omicron surge, that’s not a plan you necessarily need to abandon. Just make sure you’re in a solid enough financial position to make that a safe prospect.
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