The Covid-19 pandemic has affected almost every aspect of daily life from employment to retirement contributions. Since the pandemic began, over 30 million people have filed for unemployment, which goes to show that the financial strategies that most people had have been affected. Most people have halted contributions to their retirement accounts because of the uncertainty of this pandemic period.
The pandemic has caused an abrupt drop in stock market values across the world – which isn’t a good sign to convince people to continue contributing to their retirement accounts. However, stopping retirement account contributions altogether might not be the way to go especially if you are still employed. In this article, we will discuss all you need to know about retirement account contributions during the coronavirus pandemic.
Contributing retirement accounts during the COVID-19
You need to keep making contributions to your employer-sponsored retirement account, like the 401(k), if you are still employed. For young people, your retirement account is essential but you don’t need it now so there is plenty of time for your retirement investments to recover. For those in their fifties and sixties, you need this money to last more than 20 years so stopping contributions is not the way to go. To achieve financial freedom, you have to take risks. Yes, it is very risky to keep making contributions during this pandemic but it will pay off. It is essential that people invest in diversified retirement portfolios so that when the stock market rebounds, they will be rewarded.
Retirement account contributions
As an employee, you can contribute over $19,000 to a 401(k) and for those over 50 years, you can make a contribution of $6,500 to catch-up to a total of $26,000 for 2020. For those that are self-employed, you can contribute $57,000 into a solo 401(k), or $63,500 if you are 50 years or above. All through this pandemic, the stock market will experience more volatility because of the uncertainty which the pandemic poses. However, there are COVID-19 discounts and stocks on sale available to encourage more people to start contributing to their retirement accounts.
Retirement contribution for those underemployed or out of work
For those that have lost their jobs this period, their 401(k) plan contributions will stop on their own as no contributions can be made when there is no paycheck coming in. For those that are underemployed, you can continue making steady contributions if you can afford to. You need to contribute to get the full employer 401(k) match and missing it will be a real mistake.
The CARES Act
The CARES Act has made it easy for people to get money out of their retirement account during the coronavirus pandemic. Normally, withdrawing from retirement accounts will result in a 10% early withdrawal penalty as well as taxes on the withdrawals. People and businesses can now make contributions to their retirement accounts and get the tax benefits today. This way, they can withdraw without high tax burdens. With reliefs set in place, more people should start or increase their retirement plan contributions during this period.
If you or a loved one is feeling the financial burdens of COVID-19, you need the skills and experience of a licensed attorney. The attorneys at Dsouza and Strachan Law Group are here to help. Contact Dsouza and Strachan Law Group today for a free consultation.