Which retirement strategies to look into in a post-pandemic world

HerMoney CEO Jean Chatzky joined Yahoo Finance Live to break down which retirement strategies investors should look into in a post-pandemic world.

Video Transcript

- It's time for our retirement segment brought to you by Fidelity Investments. And we want to discuss how the pandemic, it threw all of us for a loop. But for people who are getting close to retirement and might have had to dip into some of their retirement savings, now is the time to regroup. And post pandemic retirement preparation is the key. So let's bring in Jean Chatzky, HerMoney CEO, to talk about some of the steps people should be taking. And let's start with that very first one.

There were people, because there were allowances, to raid your 401(k) to get through these tough times. So what would you say to those folk?

JEAN CHATZKY: Yeah. So if you raided your 401(k), and many people we saw doing this in the form of a withdrawal rather than borrowing because the particulars of the CARES Act made that attractive. You essentially have three years to pay that money back. And then it will just be treated as an interest free loan.

So you want to make sure that you've made a plan to get that money back into that account. And that may mean figuring out how much you have to put in on a monthly basis or a paycheck basis. But it's very likely it starts with going over your budget, getting very honest with the numbers, and then putting yourself on some sort of automatic program so that the money gets back where it needs to go.

- Jean, what are the biggest challenges when Americans are trying to decide the best ways to save for retirement? What are your recommendations especially at a time like now when so many Americans are either out of work, or their hours have been cut, and they're simply not putting away money for retirement at this point?

JEAN CHATZKY: Look, you can't fix a problem of having no income when you need to put food on the table. This is what our emergency cushions are for. This is what those stimulus dollars are for. If you are struggling, the last thing I want is for people to beat themselves up because they've dipped into their emergency cushions and savings.

But once you get back into the workforce, once your hours start building back up, then you've got to look at maintaining some of those smaller budgetary measures. I mean you're spending probably an awful lot less now than you were before the pandemic. So you want to carry that through as you look to rebuild the money that you're putting into your retirement plan. And that may mean continuing to cook more at home, continuing to keep an eye on your budget.

It's interesting. We launched a program at HerMoney called Finance Fix, which is all about helping people get honest with their budget, get in touch with their budget. We've got another session ready to go in February. And people are finding money that they didn't know they had because they are getting very clear about their flows of funds.

- Very quickly, I don't know if it was you I first heard this from. But the auto escalation plan, sum that up for us. What would that be?

JEAN CHATZKY: Sure. So a lot of 401(k)s in the past decade have put some behavioral finance tricks in place where you sign up to put, say 3% into your 401(k), every year they're going to nudge you a little bit higher. Right? They'll take you to 4% and 5% and 6%. If you are not auto escalating, you should be. And if that's not available to you, then every year set a calendar recommendation. Just set a notification on your calendar so you go back in and you nudge yourself up.

And finally, I know you've been talking all day about the markets and the highs. For people who are getting close to retirement, you've got to look at rebalancing. If you have not taken any money in stocks and plowed it back into bonds, or you're not in some sort of a target date fund that is fixing your mix as you go along, chances are really good that you're taking more risk than you know that you're taking. That's a dangerous position to be in, but particularly as you get close to retirement.