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How to help manage a loss of income

Major events that upset the economy, such as the COVID-19 pandemic, can leave many Americans feeling the squeeze. If your household income has dropped 鈥� perhaps from a reduction in working hours or a temporary layoff 鈥� you may be tempted to dip into retirement accounts or liquidate annuities to meet your immediate needs. But these moves can have lasting negative effects.

Before you put your long-term plans in jeopardy, here are five ways to help you cope with lost income. 

1. Recoup your costs
   When the pandemic first hit, you may have canceled travel and entertainment plans for spring and summer. If you received credit on prepaid transportation, lodging or activities, consider asking for your money back instead. Depending on the circumstances, you may also want to look into potential refunds on future activities, such as prepurchased concert tickets, ski passes or hotel bookings.
    
2. Reduce or postpone payments
   There may be opportunities to freeze or lower your expenses, starting with your biggest budget line items.
   • The federal stimulus package passed in March 2020 allows many homeowners who experience pandemic-related financial hardship to temporarily suspend or reduce their mortgage payments. Those with a federally backed mortgage are allowed a forbearance of up to 360 days. Note, forbearance does not forgive or erase what you owe. Scheduled interest will continue to accrue and you鈥檒l have to repay any missed or reduced payments in the future.
   • Homeowners who experience qualified financial hardship may be able to temporarily suspend or reduce their mortgage payments. Speak with your lender for details.
   • Ask if your landlord will grant a temporary rent reduction or rent freeze. 
   • If you鈥檙e paying college tuition, check if the college is reducing costs for classes that have moved online, or if they are refunding housing and meal costs. Students and parents with federally backed student loans can receive forbearance on those payments through September 30, 2020, and some private lenders are also offering emergency forbearance.
   • Contact your car and homeowner鈥檚 insurance providers to ask about rebates and discounts. Many companies are tying rebates and premium reductions to policy renewals, so shop around to see if you can find lower rates before committing to your current insurer.
   • Ask your credit card company if it will let you skip a payment or reduce the interest rate on your outstanding debt. Keep in mind if you skip a payment, the debt doesn't go away and you will still continue to accrue credit card interest.
      
3. Curb your spending
   Your discretionary spending might be down already, but there may be even more room to tighten your budget. Review your expenses and look for potential savings on apps, services and memberships. For example, you might reduce your streaming subscriptions or cancel memberships you鈥檙e not using right now, such as fitness centers.
    
4. Refinance your mortgage
   Refinancing during this time of record-low interest rates could help you reduce your monthly mortgage payment. You may still need to pay closing costs, but if you鈥檝e built up considerable home equity, a cash-out refinance could give you access to cash while lowering the interest rate on your mortgage.
    
5. Borrow with caution
   A loan could help remedy your cash-flow issues until your income returns to its usual level. A home equity line of credit allows you to borrow against your home equity as needed, with a variable rate. Consider a 401(k) loan only as a last resort, because you鈥檒l miss out on the potential growth of those funds for your future retirement needs. You may also need to pay closing costs.

Facing a cash crunch is stressful. But finding solutions other than tapping into your retirement savings can help keep your long-term financial plans on track. You can also work with your financial professional to adjust your retirement savings strategy according to your changing needs and goals.

This information is brought to you by 桔子视频 鈥� where unconventional thinking brings innovative annuity solutions that can help make your retirement dreams a reality.