The Great Recession ended over a decade ago. However, its economic effects are still being experienced by millennials worldwide. According to a report by Young Invincibles, young workers lost about $22,000 each during the last recession.
With student loans, lower wages, and increased costs of living, the Coronavirus pandemic has only added to their mounting financial problems.
Before the pandemic, about 59% of millennials regularly contributed to their retirement savings.
However, with recent job cuttings and salary losses, one in three people have already started to withdraw money from their 401(k)s and individual retirement accounts. This is sure to impact your long-term financial goals. Here are some tips you can follow to keep your rainy-day savings safe.
Think Before Acting
chne_/Unsplash: Always have a plan set aside in case something goes wrong
Before dipping into your retirement fund, take a moment to consider why you’re planning to take that step. There are always other ways of making it through a financially rough time.
Start with a budget and stick to buying only the essentials for now. Cut out all kinds of unwanted spending. You will be surprised by how much the little things add up. It’s not fun to cut corners, but it is just for a little while.
Make A Plan If You’ve Touched Your Retirement Accounts
elien_dumon/Unsplash: Have something planned for your retirement
It’s not too late, even if you have started spending your retirement money. All that’s needed is a good plan. There are different rules and policies with the 401(k)s in terms of paying back the money.
With a 401(k) loan, there are usually automatic repayments from the paycheck. But if it was a withdrawal, you will need to keep track. Contact your HR manager or plan provider to understand the options and set up automatic monthly payments.
Stay abreast of the tax updates related to 401(k) loans and withdrawals. Loan payments can be deferred until 2021, after which one gets five years for repayment. With withdrawals, Americans have three years to pay the income taxes or repay the money and not owe any taxes.
According to experts, it’s always best to pay off that money as soon as possible.
Understand the Importance of Savings
spanic/Unsplash: Saving a little bit more never hurts anyone
The most important lesson to learn from this pandemic is that savings are vital. You never know when you’re going to need it. Reassess your priorities for the future and start planning an emergency fund for times like these. Never spend more than you earn and stop living paycheck to paycheck.
Financial problems are overwhelming, but all you need is a little planning and self-control to make it through with flying colors!