Your Post-Pandemic Financial Plan

It’s hard to believe it’s been two whole years since Covid first came to town, leaving a whirlwind of confusion in its wake. So much has changed in our lives due to the virus, and if you’re wondering when things will get back to normal, you’re definitely not alone. 

For many people, the biggest challenge of the pandemic was financial. With the initial shut-down, it was hard to know how the economy — and more personally, your boss or business — would fare. A lot has changed since those first quarantine weeks in March 2020 — has your financial plan kept up?

The standard advice is to review your financial plans whenever you experience a major life change. Usually this means something like a marriage, divorce, birth of a child, new job, or inheritance. We think that the pandemic should definitely count as a major life event! Here’s what to consider moving forward.

Unemployment

If you were laid off temporarily or permanently during the pandemic, your finances have almost certainly taken a hit. If you find yourself with significantly reduced income, you’ll want to review your budget to cut spending and adjust your savings plan to match your new circumstances.

If you are currently or have in the past been able to collect unemployment benefits, remember that the federal government counts UI as income — and they tax it. If you haven’t elected to have those taxes withheld from your benefits, you could find yourself owing the IRS money when you file your tax return this year. Fortunately, the IRS offers a payment plan to help make an unexpected tax bill more manageable.

Career Change

Many people took pandemic job interruptions as an opportunity to make a career change, either by seeking a new job or by going back to school for training in a new area. If you’re in the middle of a major shift in your working life, take the time to research typical salaries and benefits in your new field. This information will help you plan ahead with a new budget so you can adjust your lifestyle accordingly.

Planning for major benefits changes can be trickier. If you’re thinking of starting your own business or becoming an independent contractor, you’ll need to research the cost of exchange-purchased health insurance and budget for that expense. You’ll also want to explore your retirement plan options and open an IRA if you’ll no longer have a company-sponsored 401(k).

Once you’ve transitioned into your new position, you’ll also want to consolidate any old retirement plans you had with your previous employer by completing a rollover to your new retirement fund. This will let you track and manage your money more easily and is a tax-free maneuver — as long as you follow the rules when you make the shift.

Early Retirement

If you were close to retirement age when Covid hit, the pandemic may have forced you to seriously think about retiring early. Can you afford to do so? This is a complex question that requires significant planning and some mathematical calculations to figure out. This is best done with a professional who can help you calculate how long your nest egg is likely to last, the tax implications of retiring early, and the effect of an early retirement on your Social Security income and/or pension plan. Working part time can also affect these benefits, so it’s important to run the numbers on various scenarios to understand all the consequences. 

You’ll also need to develop an effective plan for withdrawing your retirement income. This isn’t as simple as taking money out of a savings account, because you’ll want to sell off your investments in the most efficient way. For example, you may want to avoid selling stocks when their prices are low, because you’ll be stuck locking in lost value. A fiduciary is a good resource to ask for help with all the moving parts required to make an early retirement work for you.

Moving On

Whether you struggled during the pandemic or found yourself with a little extra money thanks to stimulus payments and spending less, moving forward from the pandemic into the rest of your life requires a good financial plan. No matter where you are right now, follow these steps to make sure you’re future is on track:

• Review your household budget to make sure current spending works with current income.
• Automate retirement savings based on your current income — review and adjust this amount to match your current situation.
• If you had to pause savings during the pandemic, review your budget now to see if you can play catch up. Even increasing your monthly savings by a little bit will help you get back on track.
• If you have extra money from stimulus, tax credits, or an unused travel fund, put it to good use! Invest this money in something better than an almost 0-interest savings account.

For help developing your post-pandemic financial plan, give us a call! We’re excited to work with you on developing a just-right savings and retirement strategy — one that reflects your new reality, goals, and dreams.