The unequal impact of the pandemic amplifies the gaps in the U.S. retirement system, Ms. Chen said. Although “401(k) contributions and balances seem relatively unaffected and unemployment has not disproportionately hurt older workers, the pre-Covid weaknesses remain: Social Security has a long-term deficit, 401(k) balances are inadequate, and older workers have trouble finding new jobs.”
Despite the hurdles to saving, there’s much you can do to triage your financial future.
First, track your total spending. Even if you’re not in a painful financial transition, the principles for recovery and planning are universal, Ms. Nolet noted. One of the first questions she asks clients is “How much do you spend annually?” Until clients invest the time in documenting their expenses, she said, they don’t really know the number: “They are like deer in the headlights when they realize they are spending way more than they thought.”
Spending has the biggest impact and is the input you have the most control over, added Ms. Nolet, who suggests — not surprisingly — creating a budget and sticking to it. “Once you know where you spend money, you can choose where to cut back,” she said. “Psychologically you have to work through wants versus needs.”
Other key spending questions she poses are: Can you afford your home? What kind of interest on you paying on loans and credit cards?
If you have credit card debts with double-digit interest, pay them off first, advises Lori Price, a certified financial planner in Florida and Connecticut.
Focus on health insurance. When many people lose their jobs, they lose health insurance coverage for themselves and family. Those laid off can often continue their insurance under a COBRA plan, Ms. Price said — but it can be onerously expensive.
“One client, a good friend who will turn 60 in a few months, was laid off facing a $1,700-a-month health insurance bill,” she said. “I told her to go through every discretionary expense. What expenses could she defer until reaching 65, when Medicare will kick in and reduce, but not eliminate, the high premiums? For those without a lot of savings, this is the first step.”
Article source: https://www.nytimes.com/2021/05/08/business/retirement-savings-catch-up-covid.html
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