Since the beginning of the COVID-19 pandemic, early retirements have skyrocketed, with record-breaking numbers. The public health emergency has changed how people view retirement. Further, this mass exodus shows no signs of ending soon. Continue reading to learn ways to navigate retiring in COVID times, the steps you should take before retiring, and the importance of having a retirement strategy.
Retirements Soar After COVID-19 Pandemic
Researchers report that the number of retired Baby Boomers soared during the pandemic compared to previous years. Roughly 1.1 million retired early, with nearly 28.6 million Boomers retiring in the third quarter of 2020. Economists reveal another 1.7 million older Americans plan to leave the job market early.
It’s important to note that not all older workers choose to retire prematurely. In fact, many Americans were forced into retirement after being laid off. Some seniors working at larger companies had two options: retire early and accept the severance package or be laid off with no severance package. As you can imagine, most Baby Boomers chose the latter option. Others quit over fears of COVID-19 exposure.
How COVID Changed Retirement
The most obvious change is people retiring early. As mentioned above, nationwide job losses led to older workers leaving the workforce earlier than expected.
On the flip side, some may have to retire later than they planned. Individuals who were laid off may have to get another job and work additional years to make up for the lack of income.
Many older adults needed to withdraw money from their retirement savings to maintain their standard of living. As a result, the Biden Administration signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law.
The CARES Act gives people permission to withdraw money from their tax-advantaged retirement accounts without paying a tax penalty. This includes 401(k) accounts and traditional Individual Retirement Accounts (IRAs). Under the provision, you could take out up to $100,000 during the 2020 calendar year.
How can I Retire and Travel During the Pandemic?
Due to the pandemic, some retirees may need to postpone travel plans. In addition to facing travel restrictions, older individuals face a higher risk for health issues from contracting the COVID-19 virus.
Still, new retirees who want to travel overseas may not know where to start. First, we recommend setting up a separate bank account for the sole purpose of travel. This vacation account will help you budget and prevent you from spending money needed to pay for day-to-day necessities.
Second, research the most affordable countries with the lowest COVID-19 cases. Lastly, take advantage of travel deals. If you’ve racked up points from your credit card, you could use them toward your trip.
For those seeking to retire and move aboard, Investopedia says the best three countries to live in are Costa Rica, Panama, and Mexico.
Coping with Early Retirement Due to COVID
Retiring during the pandemic presents its own unique challenges. With seniors having the highest risk for contracting COVID-19, many said the pandemic has a negative impact on their mental health. A study from the Kaiser Family Foundation reports one in four elderly people battle intense anxiety or depression due to the pandemic.
For those who retire early – willingly or not – it’s common to feel a range of emotions. The good news is that you can navigate these feelings by managing your mental health and sustaining an active social life. Here are a few things you can do to cope after retiring in the COVID-19 pandemic.
This is the best time to do the thing(s) you’ve been putting off. Having hobbies is a great stress reliever and allows you to possibly even find a hidden talent. There is proof that hobbies help boost your mental health. Finding things to do with others who have similar interests introduces you to new friendships and helps form new connections.
Find a Support Group
Some retirees feel lonely after leaving the labor force. During this time, it’s important to lean on friends and family. It’s also a good time to expand your social life. You can do this by forming your own support group or joining an established one.
Set New Goals
Accomplishing goals promotes a positive self-image and gives you a sense of purpose in life. Additionally, goals inspire us to try new things. This can lead to a happier and more fulfilling life.
Should You Retire During the Pandemic?
That’s why having a retirement strategy or a checklist is important. It not only helps minimize stress, but it saves money and time. In the meantime, ask yourself these important questions:
- Am I financially prepared to retire?
- Do I have a financial cushion in case of an emergency?
- Do you have a massive amount of student loan debt?
- How do I feel about potentially downsizing?
- If I retire now, will I have enough savings to pay off outstanding debt?
Retirement is a huge milestone, so it’s best to make your next move your best move.