How to retire on time in spite of COVID-19

How to navigate your long-term future as retirement plan values plunge amid the pandemic

COVID-19 isn't just wreaking havoc on Americans' near-term finances; it's also putting their long-term financial security at risk. Not only have retirement plan values plunged since the pandemic took hold, but those who are out of work are likely pausing retirement plan contributions until their income picks back up.

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If you're worried that COVID-19 will force you to delay retirement, you're not alone. But here are a few things you can do to avoid that fate.

IS FINANCIAL INDEPENDENCE POSSIBLE DURING CORONAVIRUS?

1. Leave your existing savings alone

Passed back in March, the CARES (Coronavirus Aid, Relief, and Economic Security) Act was put into effect to help Americans stay afloat during this difficult time. One provision of the CARES Act is that you're now allowed to withdraw up to $100,000 from an IRA or 401(k) penalty-free, regardless of age. Normally, withdrawals are subject to a 10% penalty when they're taken prior to age 59 1/2.

HOW TO FIND THE BEST PERSONAL LOANS

Tapping your retirement savings may be tempting when you're grappling with a hit to your income. But before you go that route, try exploring other options. If you're out of work, the companies you owe money to (like your mortgage lender, auto loan servicer, and utility providers) may agree to let you defer payments for a number of months, and that could make it possible to leave your IRA or 401(k) intact. That's important, because withdrawing from your retirement savings right now, when the market is down, increases your chances of locking in losses. It also leaves you with less money on hand when you're older, which could result in a scenario where you're forced to delay retirement.

2. Keep funding your retirement plan if you're able to

If you've lost your job and are living on unemployment benefits right now, contributing to a retirement plan may not be possible. But if you still have an income and there's money left over after your basic needs are tended to, then it pays to put that cash into your retirement plan.

First of all, the more you contribute to a traditional IRA or 401(k), the more you lower your tax burden for the year. Secondly, now's a good time to pump money into a retirement plan because a lot of investments can still be snatched up on the relative cheap. Finally, maintaining your contributions will help you stay on course savings-wise, which is the ticket to getting to retire when you want to.

68% OF RETIREES MAY BE IN FOR A HUGE SOCIAL SECURITY SHOCK

3. Borrow smartly as needed to avoid high-interest debt

You may reach a point in the coming weeks or months when you need to borrow money to pay your bills. And borrowing in the form of racking up a credit card balance may be the easiest way to go -- but it's by no means the most affordable way to go. Credit cards tend to charge exorbitantly high interest, which means that once you accrue that type of debt, you're apt to spend so much money paying it off that there may not be enough left over to fund your retirement savings when things get better.

Rather than borrow via credit card debt, try borrowing against your home. You'll generally pay a lot less interest on a home equity loan or line of credit. If you're not a homeowner, a personal loan is a better bet than credit card debt. You stand a good chance of snagging one provided your credit score is strong.

HOW CORONAVIRUS COULD DAMAGE SOCIAL SECURITY

The COVID-19 crisis is ruining a lot of people's retirement plans, but it doesn't have to wreck yours. If you leave your existing savings alone, keep funding your IRA or 401(k), and avoid high-interest debt, there's a good chance you'll manage to stick to your target retirement date despite the many obstacles that may now be in your way.

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