Health is top of mind for many Americans during the COVID-19 crisis, but so is wealth — and in some cases, hopes and dreams for a comfortable future.
About one-third of retirement savers said they’re already worried their finances will deteriorate, according to a MassMutual survey. More than half said they were changing or planning to change their retirement contributions, and of those people, 54% were going to deposit less so they had more liquid assets to tap now. Another 22% of savers said they were going to contribute more, and 24% said they’d keep their rate the same but change their risk exposure.
Money management is often emotional, but even more so during a pandemic. Although some respondents were taking measured actions during recent market volatility, such as postponing plans and saving money, it is likely others may still want to act quickly to avoid a major loss, said Teresa Hassara, head of workplace solutions at MassMutual. “They should take a breath,” she said. “Decisions made in haste are ones we tend to regret.”
Another quarter of survey participants said they were optimistic everything would return to normal, and 29% said they were not worrying until they had to. Still, a few people decided to take some steps to prevent a personal crisis. Almost four in 10 people said they recognize now is the time to stash more away in an emergency fund because they were not previously prepared. About half of people quarantined at home said they expect to save more because of lower discretionary spending.
Many Americans are in distress during this pandemic. State and local officials have issued stay-at-home orders across the country in an attempt to slow the spread of coronavirus, but doing so has cost people a significant amount of money. Record levels of workers have filed for unemployment in the last month, and others have suffered reduced earnings.
Savers already had trouble building a nest egg. There was a looming retirement crisis before the spread of the coronavirus, but the pandemic has the potential to worsen the matter, because of its impact on the Social Security program, current retirement savings and the health and well-being of individuals. The federal government’s stimulus package, known as the CARES Act, allowed workers to withdraw or borrow larger sums of money from their retirement accounts, but financial advisers warn those options should be a last resort.
Still, not all hope is lost, some experts said. Americans have lived through numerous crises and have come out of the other side stronger. Many investors who stayed in the market during and after the 2008-09 financial crisis overcame the downturn. Recent retirees 70 and older had 62% more in retirement savings than the same age group the year before the Great Recession, and people between 55 and 69 had 19% more than their same age group did in 2007 as well, said Andrew Biggs, resident scholar at the American Enterprise Institute.
The key: Focus on what can be controlled. Individuals worried about debt should reach out to credit card companies and mortgage lenders to find a solution for the time-being, Hassara said. They should also analyze and evaluate their spending, and curb whatever they can to cut expenses, if only temporarily.
Now would be a good time to consult with a financial adviser, whether that be setting up an appointment with a current adviser or finding one to work with, Hassara said. Americans are still retiring during this crisis, often because they had a financial plan they followed. “When people have a plan, they feel better, even if they are in a difficult situation,” she said. “A plan reduces the stress.”