Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about
Despite the major changes to retirement account rules under the CARES Act, nearly 72% of Americans opted to stay the course and stick to their investment plan during the COVID-19 crisis, according to a YouGov survey in this Forbes article. Experts advise against selling when the values have declined, as clients would only lock in significant losses in their portfolio. "The best strategy is to ride out the market volatility and resist the urge to sell, especially if you're not close to retirement age. Your portfolio will most likely regain value over time," according to this article.
Clients who want to boost their long-term returns by as much as 2% annually may consider reducing their equity allocation when market volatility begins and increase it when the market starts to recover, according to a study in this MarketWatch article. The strategy should be used only in tax-deferred investment accounts to avoid tax consequences, an expert writes. "If you don’t have the discipline to do that, then you shouldn’t bother, sticking instead with your previous long-term buy-and-hold strategy."
While many workers have lost their jobs because of the coronavirus crisis, those who remain employed can expect the outbreak to have a negative impact on their 401(k)s, according to this article on Motley Fool. For example, workers are likely to see a decline in their account balances and lose their employer's match. Although the CARES Act has relaxed the tax and penalty rules for 401(k) loans and withdrawals this year, workers will be better off weighing other options before dipping into their savings, as they may incur losses in the long term.
Finding the revenue to make up for the shortfall remains a “manageable exercise,” regardless of the as-yet unknown impact of the coronavirus, a Boston College economist says.
Seniors who are forced to retire early because of the COVID-19 pandemic, and have to rely solely on Social Security for income, have a few options to stretch the limited money, according to this article in Fox Business. For starters, they may consider relocating to a less expensive state, stick to a tight budget and build an emergency fund. Retirees should also shop around for the right Medicare supplementary coverage and move to a state that doesn't levy state tax on Social Security benefits, according to the article.
