When the COVID-19 pandemic resulted in business closures and job losses all around the country, Congress authorized monetary stimulus measures to help struggling Americans make ends meet. These measures included direct cash payments to individuals as well as expanded unemployment benefits. Now that more Americans have received a vaccine and some COVID-19 restrictions are being relaxed, states are looking at ending expanded unemployment benefits to encourage people to go back to work. While the American Rescue Plan Act of 2021, passed back in March, extended the $300 per week in unemployment benefits through September 6th, 2021, many states are choosing to end those benefits early and return to pre-pandemic unemployment rules.
Whether you are currently working, unemployed, retired, or you are planning to retire soon, the end of expanded unemployment benefits could have a big effect on your retirement planning. The licensed retirement phase experts at Crash Proof Retirement have drilled down deep on COVID-related unemployment benefits and here are some reasons why we think your retirement savings could be at risk when they end.
Economic Impact of COVID Stimulus Measures
While there is much debate about the merits of the COVID stimulus measures, it is hard to deny that they played a significant role in propping up the stock market’s recovery throughout 2020 and 2021. The New York Times reported in late March that stimulus measures spurred a great deal of stock market activity and a client note released by JP Morgan around the same time seems to confirm those findings. With a little over a year since the “COVID Crash,” the stock market has regularly reached new record highs and it is safe to assume that stimulus measures, including direct payments, expanded unemployment benefits, and PPP loans for businesses were major contributors to that success, despite record amounts of volatility. With expanded unemployment benefits ending early in 23 states, we could be in for a period of economic stagnation as Americans attempt to re-enter the workforce this Summer while also dealing with the new threat of inflation.
Unemployment Benefits and Workers Aged 45+
Workers over the age of 45 face unique obstacles in their job search. Although the Age Discrimination in Employment Act of 1967 strictly forbids age discrimination in hiring practices, a 2019 report by the American Association of Retired Persons (AARP) indicated that, “age discrimination remains a significant and costly problem for workers, their families, and our economy.
Individuals whose unemployment benefits are being cut off will be required in many states to apply for several positions each week to keep collecting their benefits; however, 76% of workers over the age of 45 describe age discrimination as a hurdle to finding a new job. This presents a large issue as it may be difficult for older workers to continue their employment search as they compete with younger applicants for the same jobs. When older workers are pushed out of their jobs— as millions were during the pandemic — 90% of them will end up earning less than they did before losing their job. Those who were depending on that income to fund their retirement could find that their retirement plans need to be significantly altered in the post-COVID world.
Retirement Investing and Expanded Unemployment Benefits
There is another factor that could trip up older workers trying to bounce back from the COVID-19 pandemic: IRA contribution restrictions. Currently, an individual can contribute $6,000 per year combined to their IRAs and Roth IRAs; however, workers over age 50 can make an additional $1,000 each year in what is known as a catch-up contribution. There is one stipulation: only earned income can be contributed to IRA accounts. Earned income includes wages, salaries, tips, bonuses, commissions, and self-employment income, but it does not include unemployment benefits. That means that workers who have been surviving solely on unemployment benefits will not be able to contribute anything to their retirement accounts, increasing the urgency of their need to find a new job. This may not be much of a problem for younger workers, but for those over age 50, finding new employment can be easier said than done.
Planning for a Secure Retirement No Matter What
If you are concerned about what the end of the COVID-19 stimulus measures could mean for your retirement savings, you are not alone. People in and near retirement all around the country are searching for ways to protect their nest eggs from the volatility of the stock market and older workers who lost their jobs still require a strategy to safeguard their retirement. One way to accomplish this regardless of your employment status is to adopt a Crash Proof Retirement Strategy. Over 5,000 consumers have already found the Exclusive Crash Proof Retirement System, a proprietary method of saving for retirement that eliminates fees and market risk while growing your nest egg at a rate that outpaces inflation and is competitive with other retirement savings products. The future of expanded unemployment benefits could have far reaching consequences for retirement savers like you, but with Crash Proof Retirement, you can eliminate the worry about fees and stock market volatility. To learn more about planning a secure retirement, get in touch with our licensed retirement phase experts today and receive a free Crash Proof Education by calling 1-800-722-9728 or by visiting crashproofretirement.com.