Rethinking Your Financial Goals After 2020's Wallop

Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

Narrator: The coronavirus pandemic has rattled the financial foundation of many households. While there have been signs of life in the economy, the U.S. unemployment rate remains stubbornly high, and GDP growth has declined around the world.

Morningstar's Christine Benz says many people are rethinking their financial goals.

Christine Benz: Many households have experienced income shocks and have burned through their cash reserves, illustrating the critical role that holding liquid assets play in the health of any financial plan. Everyone should set an emergency savings goal based on their employment status. Gig and contract workers should save more than three to six months' worth of living expenses because they are at greater risk for more-frequent work interruptions. Additionally, higher-income workers may need a larger savings cushion because it may take them longer to replace their jobs if they've lost them.

Narrator: While it is important to have some liquid cash on hand in a checking or savings account, a Roth IRA can be a great place to park some emergency funds.

Benz: In a best-case scenario, the Roth assets would be left undisturbed until retirement, but in a financial crunch, the account owner can withdraw his or her contributions without any taxes or penalty at any time and for any reason.

Narrator: The pandemic has left many individuals unemployed, but the Labor Department reports that older adults are one of the hardest-hit groups and have a harder time finding a new job. Some are likely considering early retirement. Morningstar's Christine Benz says early retirement isn't always in an investor's best financial interest.

Benz: If you're contemplating retiring earlier than you expected, think about sitting down with a financial advisor to model out your cash flows in retirement on a year-to-year basis. You also want to make sure that you model out Social Security benefits with different start dates. Delaying the start of Social Security benefits will lead to higher benefits throughout your lifetime, and this can have a major impact on the health of your plan.

Narrator: Go to Morningstar.com for info to help you get your financial house in order.