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Protect Your Retirement Savings with an Emergency Preparedness Plan

If 2020 has taught us anything so far, it’s that life is unpredictable. Natural disasters, disease outbreaks, and other emergencies can⁠—and do⁠—happen. When the unexpected brings financial or other consequences, it literally pays to have a plan.

Preparing for unexpected loss of income or other setbacks now can help your family stay safe, calm and provided for in an emergency. It’s also key to good retirement planning—with a “Plan B” set and ready to go, you won’t even have to think about raiding your retirement savings.

Maintain an Emergency Fund

An emergency fund allows you to save for life’s uncertainties without jeopardizing your retirement plans. We’ve all heard to save for a rainy day - yet according to a 2019 Bankrate survey, 60% of Americans would not have enough savings to cover a $1000 emergency.

Even before COVID-19, we recommended that our clients create an emergency fund - they’re built exactly for unforeseen events like this. And for more “normal” disruptions like an unexpected home or auto repair or if you need to go to the emergency room.

Rather than turning to your retirement savings in a pinch, you can pay that bill with your emergency fund. Your emergency fund should be: 

  • Enough to cover 3-6 months expenses - Assess your expenses first to see how much you’ll need, also taking into account the number and health of people in your household, and whether you have any debt.
  • Easily Accessible - Your emergency money should be liquid, not in CDs which charge a withdrawal penalty or stuck in stocks you’ll have to sell off.
  • Safe - Rather than taking on the risk of investing, keep your rainy day funds in your savings account. Or, open a high-yield savings account for better interest rates. 

Mitigate Risks With a Financial Preparedness Plan

When it comes to the bigger picture, a financial preparedness plan helps you cover all bases. These precautions make it easy to protect and inform your family in the event something happens to you, and give you peace of mind that you (and your finances) are ready for anything.

  • Insurance - Compile all plan documents including disability, life, health, and homeowners or renter's insurance. (If you don't rent, make sure your kids have it.)
  • Estate - Gather your estate planning documents into one place and let your family know where they’re stored (such as a fire-proof safety deposit box that a family member can access)
  • Benefits - For a contactless and quick way to receive your money, switch to electronic payments for Social Security, tax returns & other benefit payments 
  • Just-in-Case - Create and share your complete list of emergency contacts and other critical details such as your primary care doctor, where you bank, your health insurance provider, any allergies you have, etc...just in case. 

Get Approved for a Home Equity Line of Credit (HELOC)

If you’re a homeowner, you may have considered a home equity line of credit (HELOC). Essentially a second mortgage, a HELOC lets you tap into your home equity if you need it.

On the plus side, a HELOC gives you quick access to a large amount of cash. On the other hand, if you use it, it becomes debt. If you can’t pay it you could lose your house. For this reason, we don’t recommend tapping into your HELOC unless you really need it. 

However, if there is a natural disaster such as a tornado or a flood and you’re waiting for insurance money, you can go ahead with repairs using your HELOC while you wait for insurance to kick in.  

Pack Your Grab-and-Go Bag 

Whether you live in Denver or somewhere else, it doesn’t hurt to have a pre-prepped emergency kit in your home, car, and/or office. You never know when you’ll be caught by surprise by a disaster like a blizzard, tornado, floods, forest fires, earthquake, or simply a roadside breakdown. 

According to FEMA, being prepared can reduce fear, anxiety, and losses that accompany disasters. A basic grab-and-go kit might include:

  • Flashlight and batteries
  • LED light 
  • First aid kit
  • Water 
  • Blanket 
  • Protein/energy bars
  • Trail mix 
  • A few changes of clothes

Gather Supplies for Home Quarantine

We saw the effects of hoarding in the early stages of COVID-19. In case there is a second wave of shelter-in-place measures, take what you've learned and plan ahead. While we don’t encourage hoarding, it’s totally possible to prepare without overdoing it. Over time on your normal shopping trips, buy a little extra of the following and set aside for later:

  • Hand sanitizer
  • Soap 
  • Alcohol 
  • Bleach-based cleaning products 
  • Toilet paper 
  • Canned and frozen goods
  • Extra medications
  • Extra contact lenses
  • Thermometer

You can also familiarize yourself with CDC guidelines for sheltering in place

Retirement planning is another major piece of the financial preparedness puzzle. Having a long-term savings plan in place is super important to having the kind of life you desire in retirement, yet many Americans are underprepared. A financial advisor can help you understand where you are currently, and help you get where you want to be, sooner rather than later.

To help you gauge your financial preparedness and get tips on how to blueprint your personal retirement plan, download our 2020 Retirement Planning Guide

Get the 2022 Essential Retirement Guide

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