If you’ve bought into the FIRE (Financial Independence, Retire Early) movement, you’re in good company. Recent statistics indicate that in light of the COVID-19 pandemic, a rising number of younger Americans are declaring themselves retired. However, the economic upheaval the pandemic has wrought has thrown cold water on countless Americans’ plans to achieve financial independence and retire early. Layoffs, furloughs, deferred bonuses, and other economic challenges have made countless families sweat their savings and watch their earnings decline seemingly overnight.
Saving for retirement – especially an early retirement – takes massive amounts of work even without the added challenge of a pandemic. Whether you’ve lost your job or simply seen your savings sharply decline, preparing for FIRE right now may be tough. Nonetheless, there are still a few very small ways you can keep your plans on track, even with the recent financial upheaval.
Here are the top five.
First, keep investing
The stock market is volatile right now, but keep making your retirement contributions anyway. The funds will continue to trend upward over time, even if you see sharp dips right now, so long as you maintain a critical mass in your accounts. Not to mention, with stock prices lowering, you may see more “bang for your buck” if you invest right now. As a result, you may reap larger rewards down the road.
However, be prudent: be cautious not to invest too much, especially if you’re currently struggling just to make ends meet. But if you do have some spare cash, continue to contribute to your funds as you did pre-pandemic. If you need to adjust your contributions accordingly, do so.
Second, build a robust emergency fund
Financial experts recommend saving enough funds to cover three to six months of living expenses. However, most Americans fall far short. Per a recent survey, approximately 27 percent of American adults have never had an emergency fund. Nonetheless, an emergency fund is vital when it comes to saving for retirement: it can save you from having to dig into your IRA or 401k prematurely to cover a crisis. Also, if you lose your job, you’ll spare yourself some of the panic if you have enough to make ends meet for a while.
While it may be tough to balance your financial priorities right now, saving should definitely be at the top of your list. If you are starting from ground 0, begin by stowing away a little bit of cash each week. Even the decision to forego that daily latte, for instance, can pay dividends in the long term.
Third, resist the urge to dip into your retirement accounts
Set an absolute rule for yourself: once the money is in your IRA or 401k, it stays. Even though the CARES act has made it easier to dig into your funds by softening the blow of the usual penalties, you should still avoid doing it. Withdrawing from your accounts will frustrate much of the effort you’ve already invested in saving that money. Not to mention, reducing the critical mass of funds in your accounts means there is less there to grow with the market. As such, you’ll be forced to play catch-up later to meet your FIRE goals.
Fourth, pay down debt
In balancing your financial priorities, keep debt management at the top of your list. Debt will hamper your FIRE goals, so make sure it isn’t the one albatross holding you back when it comes time to retire. Even if you need to investigate debt relief options like debt consolidation or settlement, try to find a way to stay on top of your payments so that your debt doesn’t continue to accrue interest and increase – an issue that will only hold you back.
If you are currently struggling to manage your debt, consider reaching out to a reputable debt relief agency to discuss your options. Some of the very best debt relief options out there – from consolidation to negotiating a settlement with your creditors – might be available to you given your financial situation (especially in light of additional COVID-related challenges). Don’t be afraid to ask for help if you need it.
Fifth, stay focused on the long haul
Saving for retirement – especially early retirement – isn’t easy. It is a long game, with twists and turns and dips and increases. Even in a pre-pandemic market, increases do not happen in a linear, progressive fashion. You will see your earnings grow, then dip, then rise again – but ideally, overall, they will trend upward over time.
Right now, many of us are seeing many more dips than peaks. However, that does not mean that this will remain our reality for the next few decades. As such, it’s vital to be patient and understand that this is temporary. And while no one can tell you how long it will take to start building wealth again, by taking small steps, balancing your financial priorities, and doing what you can, with what you have, you can still set yourself up for future success.
