When the World Health Organization declared COVID-19 a global pandemic back in March, government officials across the globe scrambled to find ways to prevent the spread of this deadly virus. To address the situation, officials decided that lockdown measures would be a good way to discourage large gatherings and reduce the number of new COVID-19 cases. These measures included public mask mandates, social distancing requirements, and mandatory shutdown orders for non-essential businesses like barber shops, bars, movie theaters, and more. To replace lost wages, the government issued new legislation to provide a onetime $1,200 stimulus check to those who were eligible; as well as issuing rules for retirees, allowing them to temporarily defer their required minimum distribution (RMD) for the 2020 calendar year. While there is some debate about the effectiveness of the lockdowns, it is a fact that the number of new reported COVID-19 cases leveled off during the shutdowns compared to the spike in cases that the United States and other countries around the world are currently experiencing. Unfortunately, the stimulus benefit came bundled with widespread economic chaos.
From February to April of 2020, the stock market experienced multiple crashes, with one of the most severe being the incident referred to as “Black Monday.” On March 9th, 2020, the Dow Jones Industrial Average fell more than 2,000 points in one day. At the time this was its largest single-day drop in history, only to be broken once again on March 16th when the Dow collapsed nearly 3,000 points. Throughout the remainder of March, financial markets quickly shed the gains they made in the post-2008 recovery and investors lost millions from their investment portfolios.
An Uptick in COVID-19 Cases
When businesses around the country could re-open (with some restrictions) in June, COVID-19 cases began increasing at a rapid pace, as the second wave of the pandemic struck the United States. By the beginning of November, the United States was recording over 100,000 new cases per day. Approaching the Thanksgiving holiday, that number increased to nearly 200,000 and is likely to spike once again as more than 50 million Americans traveled during the week of Thanksgiving. As a result, many states imposed a new round of shutdown measures, although in most cases they were not as severe as the lockdowns that took place in March. Only time will tell if these new measures will be effective, but if COVID-19 cases continue to increase, the U.S. could go back into full lockdown mode once again. If that happens, it could have serious implications for your retirement accounts.
COVID-19 Shutdowns and Your Retirement
As Americans struggled in the wake of the March shutdowns, Congress acted quickly to pass stimulus measures that would provide some relief to working people and bring stability to the stock market. Financial markets responded well to the initial stimulus package, known as the CARES Act, which aided the economic recovery and potentially staved off a longer, more detrimental recession. Now as coronavirus cases are reaching record highs, another round of shutdown measures would require another stimulus package to avoid worse economic consequences. Investors who lost thousands of dollars at the beginning of the year may have experienced a recovery on the stock market, but investors who are saving for retirement must consider the compounding risks that will continue to have an impact on the economy long after the coronavirus is under control. These compounding factors include substantially increasing debts and deficits, the possibility of inflation, and the probability that a new Congress and a new President may raise taxes that impact savers as much as earners in 2021.
Retirees must also recognize that many provisions of the CARES Act expired in the Fall, while the rest of the bill expires after December 31, 2020. Retirees welcomed provisions in the CARES Act such as deferring their RMDs for the year, as they were concerned that taking distributions from their retirement accounts during a down market would cause them to lose money. Starting January 1, 2021 retirees will have to resume taking their distributions and those who keep their money at risk on the market will have to continue competing with the volatility of the market.
Congress has gone back and forth on a second stimulus package for months but have thus far failed to reach an agreement. While negotiations continue, retirees will undoubtedly be watching closely to determine if another provision about retirement savings and rules for distributions will be included. With partisanship and contentious election rhetoric engulfing Washington lawmakers, it’s currently up in the air whether a new stimulus will be passed before the end of the year. In the absence of a new stimulus, strict shutdown measures could easily lead to another market crash that devastates the retirement savings of millions around the country.
Protecting Your Retirement from Shutdowns
While the country races for a vaccine to get control of the virus, investors who are in or near retirement could be impacted greatly by another round of COVID-19 shutdowns and the outcome of stimulus negotiations on Capitol Hill. Lawmakers, as well as the stock market, could have a tremendous impact on how much money you have to live on in retirement if your nest egg is not protected. Retirees, and anyone who is nearing retirement that is invested in the risky stock market would be well-advised to find safe alternative investments.
At Crash Proof Retirement®, we’ve helped thousands of retirees protect their retirement nest eggs from risky infections by educating them about using our revolutionary Crash Proof Vehicles. These proprietary vehicles are specifically tailored to meet each investor’s retirement financial needs while providing investors opportunities to grow their nest eggs without having to worry about losing their principal in the event of a stock market crash. Our team of licensed retirement phase experts can help you protect your retirement savings, regardless of shutdowns, stock market crashes, and stalled stimulus bills. While the government may get the virus under control, the volatility of the market is here to stay. To find out more about the exclusive Crash Proof Retirement® System, call 1-800-722-9728 or visit www.crashproofretirement.com.