2020 was a catastrophic year for millions of Americans, local businesses and many industries.
As we start a new year, private finances are still top of mind for many Americans — many of whom need to re-think their own workforce and retirement preparation due to COVID-19.
Here are three things to consider when making your own financial plan for 2021.
1. Go back to basics
While the general rule of thumb (out of a global pandemic) is to have an emergency fund of three to six weeks of expenses in case your fund was depleted because of a job loss in 2020, set realistic goals for yourself and know that it might not be possible to have that crisis fund replenished in the first few months of 2021. Rather, re-establish a long-term target and try to build the fund back up again during the first half of this year.
2. If you have been pushed out of the work force in 2021, re-evaluate your career expectations for the New Year
As 2021 begins you ought to be aware that a variety of businesses have been booming during the coronavirus pandemic including IT service suppliers, telehealth and home health care, e-commerce, landscaping and construction, food services and several others — each of which are hiring.
Even if these jobs may not be what you initially imagined for yourself, in case you’re looking for employment, it’s important to re-calibrate your expectations and have work which you may not have originally expected.
Not only will it give a steadier flow of revenue and supply additional benefits for you and your family including healthcare, mental health and prospective subsidies of childcare services, but maybe most importantly in the long run, having the occupation is going to keep you off the sidelines.
The longer you sit out, the worse it gets, and the harder it will be to get back in the workforce.
3. Retirement may come sooner than expected for some. Here’s what to do
Finally, with more than 20 million unemployed during the peak of COVID-19 in April 2020 in accordance with the U.S. Bureau of Labor Statistics, many Americans such as Baby Boomers and Gen X-ers have been made to retire early this year or are thinking about retiring earlier than anticipated in 2021.
But prior to making the decision to retire, it’s important to check at your unique assets and figure out the type of income these assets will generate to see whether retirement is financially feasible.
People are living much longer these days. Thanks to higher awareness of health and wellness coupled with access to good healthcare, general life expectancy is greater now than at any other time in U.S. history.
That’s why retiring at age 55 might not be financially sensible for everybody. For instance, if you are 55-years-old, but are wholesome and are expected to live until age 95, are you sure your assets can support you for another 40 decades?
Make sure that you run the numbers on different retirement withdrawal strategies, such as adjusted percentage withdrawal and the like. The frequently used rule of thumb for retirement spending is called the 4% rule, which will be when you add up all of your investments and withdraw 4% of the total throughout your first year of retirementto make sure your assets are adequate for retirement.
If you’re expecting 40 years of retirement, then ensure your withdrawal approaches will allow for this interval and no longer.
Bottom line: Make these important calculations before making the significant decision to retire early.
Why? Because it will be more difficult to get back in the workforce at age 65.
