- Sept. 29, 2020
-- With over 40 million people unemployed and counting, there's no denying the economic fallout of the pandemic has become an unprecedented financial burden for Americans – and retirees are no exception. A recent surveyconducted by The Harris Poll shows the pandemic will hurt retirement nest eggs more than the Great Recession, forcing 7 in 10 Americans to dip into their retirement funds, scale back contributions and potentially work longer than expected. Steve Sexton, financial consultant and CEO of Sexton Advisory Group, shares his insights on what retirees should expect in the months ahead.Higher taxes
– While the $3 trillion stimulus bill provided relief for many out of work Americans, this will ultimately be paid for by taxes over the next few years. "A stimulus bill of this size will likely raise federal tax rates to cover the country's exponentially growing debt problem. The expected increase in taxation could occur as early as next year," says Sexton. "Periods in which tax rates increase are especially difficult for people planning to retire, especially since it directly impacts your budget and lifestyle expenses."Inflation
– Also a result of the stimulus bill, we can expect the pandemic to cause some inflation, which means your savings will be worth less. "In terms of retirement, we'll likely see Americans update their retirement strategies to seek safer, less risky returns," adds Sexton.Depletion of the Social Security Trust Fund
– A recent report prepared before the pandemic showed the Social Security Trust Fund would likely be depleted by 2035; however, with the economic fallout caused by the pandemic, this depletion date has been moved up to 2029. "If the trust fund runs out, all recipients will see an automatic reduction in their social security check," says Sexton.Suspension of 401(k) Contributions and Matching
– "As businesses look for waysDelayed Retirement
– "It's very likely those expecting to retire soon will need to delay their retirement and work a couple more years to make up for the financial loss caused by the pandemic," adds Sexton. In an effort to stay on schedule, some people might opt for supplementary income through freelancing or additional part time jobs.
to cut down on costs to stay afloat during the pandemic, many employers have decided to suspend matching contributions to retirement funds," says Sexton. In fact, over 20% of companies that offer 401(k) plans have suspended retirement fund matching indefinitely. Employees, who might be recovering from being furloughed, will likely reduce their contributions while they try to catch up on their bills.
For more information on Sexton Advisory Group, please visit www.sextonadvisorygroup.com.