I’m hearing echoes of 2008 when the great recession was being fully recognized. If you are feeling angry, concerned, depressed, or worried about your coming retirement or its lifestyle, then congratulations are in order. You’re ahead of the population who have no plan and no options. I retired early just over 10 years ago and remember clearly how this can feel. The 2008 recession happened just as I hit my early retirement target. This time around the question is, will COVID-19 change your retirement plans? 

Although the financial collapse of 2008 and this pandemic both come with the tag of “unprecedented”, this is different. There are just as many unknowns and it may take years for things to appear anywhere near normal. But this worldwide event isn’t just about financial and employment turmoil hitting people and the economy. It’s also our physical health, even life and death.

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Should COVID-19 Change Your Retirement Plans?

It was an agonizing decision in 2008 when I decided to delay my early retirement. A delay that lasted a year. Things were still uncertain when I finally announced my retirement at the age of 51. But I was confident it was the right time to walk away. Where some of what I faced then still applies today, there are also new COVID-19 challenges to one’s retirement plan to consider. 

Employment –

The 2008 recession brought many layoffs. I began vocally angling for layoff selection so that I could collect a severance package and spearhead my retirement. They would instead choose to financially devastate other employees who needed to work and then pass all their work to me. I should have kept my eagerness to leave to myself and just under-performed. But at that time I had a misguided notion of workplace legacy that prevented me from doing that. So I used my time to continue saving and investing. I also looked for signs that the market had bottomed. That bottom happened in March 2009, but it took another 6 months for me to feel comfortable with that assumption. 

Healthcare –

Timing retirement for healthcare was crucial to my plan. I earned a retirement healthcare benefit where I could buy into the employee plan after 30 years of service. Leaving at my planned date or delaying retirement had no impact on it. I do pay a hefty price for my retirement healthcare and could save money with the ACA. But I have stayed with my old employer plan since it’s a “use it or lose it” benefit and the ACA has been under constant political threat.

Portfolio –

In the 2008 recession my portfolio took a big hit just like everyone else. I was diversified with a mix of stock and bond funds. But there was no safe haven from the recession’s crippling grip. It was depressing to finally get to my target and then watch my portfolio damaged by the recession. I kept running my numbers through a retirement calculator to build retirement funding confidence. Almost all of my retirement portfolio was in 401K, IRA, and Roth accounts. 

I had always planned on rolling my 401K and IRA funds into a SEPP 72t IRA retirement funding account to receive pre age 59 ½ penalty free distributions. While I was still on the job I would monitor the SEPP 72t calculated formula interest rate to assure distributions would meet retirement funding needs. As interest rates drop it takes much more to be tied up in the SEPP 72t IRA to get the desired retirement funding. 

Debt –

I was debt free in 2008 other than my modest mortgage. As interest rates continually dropped I used the delayed retirement time to refinance at a lower mortgage rate. The bank only saw me as someone still working for a long time employer. Not someone who was just waiting for the right moment to ditch the rat race.

The refinance lowered my monthly payment and at that time they offered no fee refinancing. The reduced mortgage payment allowed me to set aside more each month in my retirement savings as I waited for signs to pull the retirement trigger. Having a lower mortgage payment  also lowered the amount I would need each month from my portfolio once retired. 

Retirement Lifestyle – 

My job was far from flexible, I was required to be on site as a lead engineer supporting a billion dollar revenue generating operation with 24X7X365 pager obligations. I understood what I wanted to retire to, looking forward to a more flexible retirement lifestyle. I was upset about how the recession impacted those plans as much as any financial concerns. 

My plans included what I call retiring early and often. There were a lot of opportunities I wanted to pursue aligned with my interests and passions. I see retirement’s definition as the absence of NEEDING to work, not the absence of working. The timing of the recession and job retraction added challenges to that portion of my retirement plan. 

Some of my plans regarding my local community were being changed on a monthly basis. There were numerous business closures, places that I frequented and had built relationships with. Some of my more idealistic pursuits or retirement dreams were shattered with their closures. It required me to constantly change my retirement lifestyle goals and accept it as part of the flexibility I wanted to embrace.

In an environment where jobs and money are tight there are other dynamics that came into play. For example, I planned on being more free to travel. Checking travel rates during the recession showed that everything was discounted, making our travel more affordable. I’m an automotive enthusiast and it’s a big part of what I retired to. People thought the world was coming to an end in March 2009. On a panic sale I was able to purchase a car at a huge discount that I had been researching and chasing after for over 3 years. Where recession challenges presented themselves in some parts of my retirement plan others opened up.

New Pandemic Issues That Should Be Considered Within Retirement Plans

I used my early retirement delay to better position myself financially. But also just as important, to better position myself mentally for the new landscape that I would be retiring in. There are parallels with what’s happening now. But answering the question today, should COVID-19 change your retirement plans, has different nuances worth considering.

Safety –

COVID-19 is highly infectious and dangerous. I didn’t have to worry during the 2008 recession that staying on the job could kill me. When looking at the public who are now out and about, there is a high percentage who don’t take COVID-19 seriously. I have to believe that will be likewise in the workplace once it opens up. If I felt my work environment wasn’t safe I would have done things differently than I did when it came to my retirement delay decision. 

This safety issue is also paramount to retirement lifestyle plans. Just going out to the grocery and recreation, let alone travel, carries health risks. Finances aside, if I was able to ride this out with a work from home position I certainly would again delay retirement. For the already retired like myself, this atmosphere today is nothing like my pre-COVID-19 retirement lifestyle. I was amused to read that some felt this has been a taste of early retirement. But I see little difference to what one’s restricted lifestyle would be today after pulling the retirement trigger or working safely from home in this environment. Except for delaying retirement and working from home offers the opportunity to safely live this pandemic restricted lifestyle with a paycheck. 

Opportunity –

Do you even have a choice to stay on the job longer until things pan out? So many people are already being cut loose and collecting unemployment benefits and stimulus. If in this boat, I would think keeping my mouth shut about retirement plans, collecting unemployment, and looking for non-existent equivalent jobs as long as possible would be the strategy to use in this pandemic restricted environment. Even if that meant using some retirement savings to subsidize unemployment benefits until they run out. Only then quietly officially retiring.

If still working, then another reason to maybe keep quiet about retirement plans is there might be recessionary cutbacks in business going forward. This reduced business environment may last a while. Some companies may offer retirement incentives or packages to reduce employee headcount. If you are on the fence it may benefit you to wait and see what happens.

Pandemic Portfolio –

Diversification still matters. I found at the pandemic market’s lowest point in March 2020 that my recession hardened portfolio suffered far less than the S&P 500, DOW, or popular all stock market index funds. Thankfully the market has recovered a bit since that low. But as we’ve witnessed, the slightest hint of coronavirus economic bad news roils the market. That said, during this no end in sight pandemic until a vaccine is available world, I believe in having a sufficient cash bucket within my portfolio. No telling if that recent market floor will be breached and it being long lasting. 

My early retirement story is nothing spectacular and 10 years into it I’m still not old enough for Social Security. But if today I was under age 59 ½ relying on the same early retirement strategy as I was in 2008 then I’d be in real trouble. When looking at today’s super deflated 72t calculated interest rates, it would be difficult for all but those retiring early with million dollar IRA portfolios to rely primarily on a SEPP 72t strategy. Interest rates will have to rise before that can be a viable early retirement strategy for most people today.

Social Life – 

With this pandemic we have all now seen how isolation feels. Along with asking yourself, should COVID-19 change your retirement plans, we all need to ask how we plan to stay engaged in a world pandemic environment. Many people find out at retirement that our social life for the most part revolves around our work. It took me a lot of concentrated effort to expand my social circle beyond work after I retired. I see that everything I did to grow my social network when I first retired would be near impossible to do in this pandemic environment. 

It’s very important when deciding whether to retire now or delay to consider social engagement. If you’ve already built a large local non-work related social circle then this won’t be a major consideration. But if your social life relies on your work pals, I can say from experience that work friends can quickly fall away after retirement. The dynamic of our shared workplace experience ends and that primary bond breaks once we retire. 

We Have To Navigate the Circumstances

This pandemic has not only challenged many retirement plans financially, it has also disrupted retirement lifestyle plans. In the end, a successful retirement is more than just the numbers. What we retire to is just as important to consider in our plan. To avoid retirement regret and second guessing we also need to retire with confidence. That takes looking at all angles using what we know today and what we can logically assume going forward. 

Would my leaving on my long planned for target retirement date in 2008 have caused early retirement failure? I will never know. I do know that other than giving up a year of retirement freedom, my delay didn’t hurt me. It gave me time to get over the shock of an unprecedented world event and time to dig in mentally to what I really wanted. 

I had worked very hard to meet a 10 year early retirement plan. But instead of retiring on a predetermined date, I retired when it was the right time to retire given current unprecedented circumstances. What matters is that I successfully overcame recession related challenges and met all of my early retirement lifestyle desires.

It’s Up To You To Answer The Question

Should COVID-19 change your retirement plans? If you are among the fortunate to have any say in the matter, take your time and look at all the angles before deciding. Explore ways to leverage any opportunity to better your situation. Then jump in with both feet and feel confident in your decision.