Retirement Prep in a Virtual Age

The start of 2020 brought the excitement and beginnings of a new decade and has been one of the most memorable of my life. I was born in the last quarter of 1979, so this is the start of my 5th decade. The excitement I felt at the beginning of the year for the new decade seems like so long ago at this point and that excitement has largely faded given the devastation that the COVID-19 pandemic has wreaked in America this past year. Facing this adversity has allowed me to look at life with a whole new perspective and an appreciation for just how fragile life really is.

On Monday March 9, 2020 the Dow Jones Industrial Average fell 2,014 points. “Black Monday,” as some in the Financial Industry have dubbed it, was at that time the worst single-day point-drop in U.S. market history and was followed by a new record set on the following Thursday, March 12, 2020 with a drop of -2,353 points and then again on 3/16/2020 with a 2,997 point drop. The fear and speculation of the COVID-19 pandemic drove investors worldwide to “Sell, Sell, Sell,” and thus put the once humming markets into a tailspin. This market uncertainty has been one of the many pain points 2020 has brought thus far. You are not alone if you feel uncertainty and the good news, is we can help.  

The uncertainty in markets is understandable, but these rocky times too shall pass. One of the most important things you can do right now to combat uncertainty is stay the course in your Retirement Planning.  As one of my teammates said a few months back, the last thing you want to do during these uncertain times is make a “permanent decision based on temporary circumstances,”. What do we mean by that? Well it’s easy to look at our Retirement Plans, whether it be a 401(K), 403(b) or 457 as nest eggs that we can tap into during uncertain times, and the IRS has even eased restrictions to access retirement plan money through the CARES act for emergency needs, but when you take a distribution from your plan prematurely (before 59 ½ for most) you’re taking away the ability for that money to stay tax deferred.

The contribution limit for employer-sponsored retirement plans for the 2020 tax year is $19,500 for those age 50 and under, and for those over 50 years old, that limit increases by $6,500 for a total of $26,000. So, why does the IRS allow you to deduct these contributions from your Adjusted Gross Income each year on your tax reporting? Well, this is the amount the IRS believes you should be saving for a proper retirement, meaning that’s the amount that they have deemed necessary for ensuring that the average worker can retire with as little of a gap as possible between their working income and their retirement income. The caveat is that the IRS bases these calculations on the entire working life of the average worker, so it’s imperative that you start saving now, if you haven’t already done so. Time is a valuable commodity when it comes to saving for retirement, considering the time value of money. The longer you wait to contribute to your retirement plan, the longer it will likely take you to realize the benefits of these tax-deferred retirement savings plans. An important point to note, is that while you’re lowering your taxable income now, you are also deferring potential taxes on the gains in these plans until you start withdrawing funds later… ideally after 59 ½ to avoid potential early distribution penalties set by the IRS.

Our financial professionals here at National Life Group have done an amazing job pivoting to these new social distancing and mask wearing norms. Nearly overnight many of our agents and agencies have had to become virtual appointment gurus, with one goal in mind: bringing peace of mind to our clients. They can hold appointments and deliver annuity policies virtually, while keeping our communities safe and continuing the retirement planning journey for our over one million delighted clients. The bottom-line is this: don’t let the noise of our current and temporary circumstances get in the way of planning for your golden years. For some of us, that might seem like light years away and if you have that kind of time, make sure we you are capitalizing on that time to realize the potential these valuable retirement savings plans can provide. For those of us nearing Retirement, National Life Group has multiple options to help you preserve your nest egg and retire with the dignity you so deserve.