The COVID-19 pandemic proved to be devastating to the employment prospects of Americans over 50 years of age. These workers were the most vulnerable to the coronavirus and many were laid off or took a hiatus until the pandemic was under control. Now, nearly two years since the pandemic began, Americans over 50 are struggling to find their way back into the workforce, and it is happening during a prime time for retirement saving. If you are facing a similar situation and getting close to retirement, you may have to consider the possibility of a forced early retirement. The team at Crash Proof Retirement® has more information about unemployment among older workers and what you can do to protect your nest egg if you are forced into an early retirement.
Older Workers Leaving the Workforce
According to the Schwartz Center for Economic Policy Analysis, approximately 3 million Americans over the age of 55 lost their jobs during the pandemic. This was the first time since 1973 that unemployment for Americans 55 and over exceeded that of workers who were in the middle of their careers. As lockdown measures ended and the broader economy mounted a recovery, older workers slowly returned to the workforce. Although unemployment for workers over age 55 decreased slightly in January 2021, analysts attributed this change to members of that age group leaving the workforce entirely, rather than finding new jobs or returning to their old jobs.
Of the workers aged 55 and over, those in the lowest income distribution were hardest-hit by COVID-19 layoffs and closures:
- 55% of workers in the bottom 50% of the income distribution were forced into early retirement.
- 32% of those in the next 40% of the income distribution were forced to retire early.
Since low-income workers generally have less saved for retirement than their higher-earning peers, the COVID-19 pandemic added pressure to an already growing retirement crisis. Workers who anticipated staying in the workforce until Social Security’s full retirement age of 70 may be forced to withdraw from their savings until they are eligible to collect their monthly Social Security benefits at age 62. Collecting Social Security early, however, reduces the total monthly benefit that someone would receive compared to waiting until their full retirement age; this potentially creates a more difficult financial situation in their golden years.
Why Retirement Saving after Age 50 is So Important
While you may think saving for retirement is best accomplished when you are young, the period after age 50 is crucial in building a healthy and robust nest egg. Starting at age 50, the IRS allows catch-up contributions to Individual Retirement Accounts (IRAs) and 401(k) accounts. This allows workers who are approaching retirement to set aside more money in these accounts for retirement than they could before reaching age 50. By raising contribution limits for workers over the age of 50, the IRS gives older workers the chance to beef up their nest eggs just before retirement, which is a huge help for those who could not save as much when they first entered the workforce.
Annual catch-up contribution limits for retirement accounts include an additional:
- $1,000 for IRAs and Roth IRAs;
- $6,500 for 401(k), 403(b), SARSEP, and Governmental 457(b) plans; and
- $3,000 for SIMPLE IRA and SIMPLE 401(k) plans.
Catch up contributions add significant capital to retirement accounts and can bolster your retirement savings just before you enter retirement. Unfortunately, Americans over 50 who lost their jobs during the pandemic will not be able to take advantage of catch-up contributions unless they can manage to find another job.
Planning for a Secure Retirement
If you are over the age of 50, or you are approaching that age, it is essential that you have a plan to counter the possibility of having to retire early. Millions of workers over the age of 50 were caught off-guard by the pandemic, but future events do not have to catch you by surprise. If you are still working, the Crash Proof Retirement® Team recommends maximizing your retirement account contribution limits every year, if possible, including any catch-up contributions that you are eligible to make. Be sure to also take advantage of 401(k) plans that offer an employer contribution match if it is offered in your workplace.
The COVID-19 pandemic not only impacted workers, but it also impacted where investors put their money. If you have reached your contribution limits and still have money left to invest, do not put it at risk on the stock market and in other securities-based investments. Mutual funds, target date funds, and other popular investment vehicles that are based in the securities industry carry the same risk as stocks and bonds. Whether you lost your job due to the pandemic or are preparing for the final stages of your working career, the exclusive Crash Proof Retirement® System can help you establish a plan for retirement to protect the wealth that you have accumulated during your working years. The Crash Proof Retirement® System has helped more than 5,000 consumers save for retirement using safe financial vehicles guaranteed to protect you from losing your principal during a market crash. If you would like to know how the proprietary Crash Proof Vehicles can credit interest at rates similar to securities-based investments while eliminating market risk and fees, call 800-722-9728 or visit crashproofretirement.com for your free financial checkup.