(Newswire.net — October 27, 2020) — The COVID-19 pandemic has impacted nearly every aspect of our day to day lives, and this includes our finances. For many people, saving for retirement has been a significant part of their financial plan. However, with an economic recession and millions of individuals unemployed, retirement plans are being thrown for a loop. Daniel Orfin is a financial planner and the founder and president of Orfin & Associates in Troy, Michigan. Orfin has worked in the industry for several decades and is diligent about helping his customers achieve their financial goals, that includes saving for retirement. Over these last few months, he has witnessed firsthand how anxious many Americans are about their finances due to the current economic downturn. Below, Daniel Orfin provides his insight into a few ways that COVID-19 is affecting people’s retirement plans in the United States.
People Will Be Forced to Work Longer
Given the circumstances surrounding COVID-19, many Americans are expecting to work longer than they initially anticipated. A drastic increase in unemployment, coupled with fallen incomes due to the pandemic have individuals and families concerned about their financial future. While most essential workers were not permanently laid off, many were temporarily furloughed or faced reduced hours.
Additionally, some Americans have reported that due to financial difficulties for their employer, many companies have stopped matching 401(k) contributions. While this may not be as significant of an impact as being laid off, it still directly affects anyone who was counting on that income for retirement. Although it is impossible to know the definite impact for years to come, Daniel Orfin expects a large number of people, especially those who are currently within 10 or 20 years of retirement (in the 45 to 55 years old range), to delay their retirement plans to make up for this lost income.
Investment Strategies Are Not Changing
According to Daniel Orfin, despite a shifting economic landscape, few individuals are changing their retirement savings strategy. He states that this is likely due to the current market uncertainty alongside the low-risk tolerance of many Americans who have already lost a significant amount of their income.
Many Orfin & Associates clients have chosen not to make any changes to their 401(k) or IRA contributions. Many are also unwilling to make any new investments in stock or bonds and have instead decided to stay the course. Orfin claims that it is understandable why most are not opting to shift their investment strategy and claims that this is also likely the best course of action. Historically, statistics demonstrate that individuals who stayed the course during times of economic uncertainty typically see a higher profit than those who decide to sell.
Americans Are Looking to the Professionals
Given the current level of economic uncertainty, many Americans are now seeking help from a financial professional. A report conducted in April of this year by The Harris Poll found that 24 percent of Americans surveyed were seeking help from a financial advisor for the first time ever due to the pandemic. Daniel Orfin claims that Orfin & Associates have seen an increase in individuals looking for retirement advice and are searching for methods to best protect their existing savings.
Additionally, many people have been tempted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was passed in March 2020. The CARES Act eased penalties for anyone wishing to withdraw money from their individual retirement account (IRA). For employers who allow retirement plan loans, the CARES Act doubled the limits of these loans. However, despite these measures, many people are left wondering whether withdrawing from their IRA or increasing their retirement loan is the best course of action.
As a result, Dan Orfin recommends consulting with a financial professional to make educated decisions that are reflective of your personal financial situation and long-term goals.