“Rising unemployment has serious implications, even for those already retired.” Robert Cannon.
As the country emerges from COVID-19-related lockdowns, we are beginning to see more of the economic aftermath, particularly in the form of unemployment.
When you are already retired or are close to retirement, it’s tempting to feel somewhat insulated from the effects of widespread unemployment. This feeling of safety is typical if you have managed to craft a retirement plan with multiple income streams or have a government or other pension. However, you must remember that if a rising tide lifts all ships, then a receding tide can beach those ships.
Unemployment has implications for Social Security. Payroll taxes paid by employers are what keep Social Security viable.
Common sense tells us that there will be less payroll tax collected as more businesses close permanently and put people out of work. Leading business schools, such as Wharton, say that pandemic-related unemployment could cause a shortfall in the Social Security Trust Fund.
Economists also predict that the fund might run out of money five years earlier than initially anticipated. Compounding Social Security’s woes is the thousands of people in their 60s who lost jobs during the pandemic. Many of these unemployed seniors have opted to take their Social Security before full retirement age, putting a strain on the system.
It would be wise if you kept an eye on your portfolio. It is fantastic that you did the right things when you planned your retirement. You can now enjoy the fruits of your labor. But, never believe you can stop thinking strategically about your money.
Regular meetings with your retirement and income specialist and deep dives into your portfolio are critical. What made sense only a few months ago may not make sense now. Warren Buffett once remarked, “You only have to do a few things right in your life so long as you don’t do too many things wrong.” At this point in your life, you must remain vigilant, flexible, and resilient when it comes to your savings to avoid mistakes. Right now is the ideal time to determine your best level of risk and make adjustments accordingly. Can you sleep well at night with your current allocation, or do you worry yourself awake?
Micro-manage your 401k or other qualified plans
If your portfolio includes qualified plans like 401(k) s and IRAs, you need to scrutinize those accounts. If fees are too high, find out how you might be able to lower them. If you have enough money in the accounts, try and diversify the funds as much as you can. Seek your financial advisor’s advice so you can achieve the right asset allocation for each plan you have.
Welcome to “Scam Land.” Increases in unemployment rates, both in the United States and abroad, have far-reaching social and economic consequences. For example, you may have heard about the sophisticated international network of hackers who recently skimmed off millions of dollars in unemployment benefits intended for Americans.
On a local level, there has been an explosion of scams targeting seniors. Much like the thief who robs banks because “that’s where the money is,” fraudsters look at retirees as low-hanging fruit, ripe for the picking. If you bank or pay bills online, you should look into what’s available in the area of fraud protection.
Pay close attention to all your savings and credit accounts. Never give out personal information online or over the phone unless you are sure the contact is legitimate. If you think you’ve been scammed, reach out to local authorities and senior services in your area as soon as possible.
Conclusion: High unemployment has numerous consequences that can, and do, impact retirees and those about to retire. Understand that even though you have planned well, you are not exempt from the effects of high unemployment and a weakened economy. Proactive management of your assets is necessary to soften blows to your retirement income.