Eventually, the economy and stock exchange market will bounce back from the effect of Covid-19. However, the crisis and its economic consequence could have a devastating impact on some baby boomers’ retirement accounts. Joseph Coughlin, director of AgeLab, a Massachusetts Institute of Technology, says the market downturn will leave a massive imprint on those near retirement.
Effects of the coronavirus on boomer retirements
Much of the impact will depend on how severe the shutdown becomes in the next few months, and how deep an economic impact it can have. Below are eight ways the pandemic may affect boomer’s retirements.
1. Young boomers may fall farther behind: Just like with the 2008 recession, which unsettled the plans of most near-retirees, the pandemic may affect the retirement accounts of late boomers (born in 1960 or later).
2. There’ll be panic:
Almost anyone will panic if things don’t go as planned, especially when you know you have less time to fix it. During the 2008 market downturn, 5% of those aged 55 or older dumped their stocks, and consequently missed the rebound of 2009.
3. It will become more difficult to work harder:
As mentioned above, many boomers may be forced to retire early, adding to the increasing shrinking of the boomer labor force. While a lot of boomers want to keep working, the harsh economic consequence may limit this.
4. The Cash Bucket Strategy Will Become More Popular:
The cash bucket strategy involves keeping three to five years’ worth of money for expenses in cash or treasury bonds. The idea is so you can have enough cash to be able to wait for the market to recover.
5. Most Boomers Will Have To Cut Short Their Travel Expenses:
Retirement is a time to travel and see places, but with a shortage of income, most boomers will have to get some cruises off their bucket list.
6. More time Will be spent with family:
Spending time with your family is one of the primary reasons people retire. With the economic crisis and travel restrictions, most boomers will spend more time with family.
7. Aging at home will be more compelling:
The spread of Covid-19 in nursing homes in New York will likely be imprinted in most boomers and their adult children. This will make more people desire to spend their retirement at home.
8. A significant change will happen to care facilities and senior housing:
Several senior houses have closed in the past few months due to rising costs, shrinking demands, and reimbursement pressure. While nursing homes won’t disappear, they’ll likely change and embrace the present realities.