There’s increasing talk of a second stimulus. It can take on quite a few different forms. Consider these 3 strategies if second stimulus funds arrive:
“With unemployment the highest since the Great Depression, ordinary people are hurting,” says Michael Tove, President of AIN Services in Cary, North Carolina. “Clearly, they need help and a second stimulus package would provide some relief. If there is a second stimulus package, retirement savers, like anyone struggling financially, need to be mindful of how to use the funds.”
But you don’t have to limit your thinking to the short-term. By allocating any money received through a new stimulus to your retirement, you’ll be helping yourself live more comfortably when you do retire. “There are a few strategies retirement savers could consider,” says Paul Swanson, VP Intermediary Distribution at CUNA Mutual Retirement Solutions in West Chester, Pennsylvania. “If individuals used payments from the first package to help with immediate needs, they could consider using any payments from the next one for future retirement needs. If relief comes in the form of a payroll tax reduction, it will be easy for this to be absorbed into a normal monthly cash flow.
“If possible, do not lower or stop your retirement contributions,” says Jason Field, Financial Advisor at Van Leeuwen & Co. in Princeton, New Jersey. “Use the stimulus for everyday expenses instead of not saving for retirement. Investing the stimulus would be an ideal long-term strategy, even if that is not what the Congress intended. Try to avoid spending all the money on a big purchase that is not necessary, especially if cash is tight around the house.
Once you’ve accomplished this, then you can look at the third strategy. “For those who are still working and/or already have a good amount in an emergency fund, a second stimulus could be put toward an IRA contribution in part or full of the amount received in the stimulus,” says Craig Mazzini, Institutional Retirement Consultant at Unified Trust Company in Lexington, Kentucky.This strategy is similar to the Christmas Bonus strategy.
Indeed, the nature of the stimulus might produce an immediate additional bonus you’re not even expecting, but only if you use it to save in your retirement account.
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