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Evolution of Retirement
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How the Pandemic Affected Retirement

Five tips to help clients rework their plans for a post-COVID world.

The COVID-19 pandemic had a profound impact on many Americans, including their retirement plans. Due to the financial and lifestyle upheavals caused by the pandemic, some people are retiring earlier than they originally planned, while others are delaying their retirement and working longer. These developments will likely affect many of your clients and may prompt you to help recalibrate their portfolios, as well as their expectations.

The Pandemic's Effects on Retirement Planning

According to a Northwestern Mutual 2021 Planning and Progress Study, more than one-third (35%) of Americans say they have changed the age when they plan to retire due to the pandemic. Twenty-four percent now plan to retire later and 11% plan to retire earlier. Thirteen percent of those who plan to delay retirement will do so by one to two years, while 39% will delay retirement by three to five years and 12% will delay retirement by six to 10 years. Thirty-five percent will delay retirement by more than 10 years.

Meanwhile, 12% of those who say they will accelerate their retirement due to the pandemic plan to do so by one to two years while 48% will accelerate retirement by three to five years and 24% will accelerate retirement by six to 10 years. Fifteen percent will accelerate retirement by more than 10 years.

The net effect of these revised expectations has impacted the overall average age of expected retirement. The average age at which people now expect to retire is 62.6, which is down from 63.4 before the pandemic.

Retirement confidence has also taken a hit. In the 2021 Retirement Confidence Survey conducted by the Employee Benefit Research Institute (EBRI) and Greenwald Research, 33% of workers and 25% of retirees say the pandemic has made them somewhat or significantly less confident that they will have enough to live comfortably throughout retirement.

Addressing Clients’ Concerns About the Pandemic and Retirement

Given these statistics, there’s a good chance that some of your clients are asking you for advice about retirement planning in light of the pandemic. How should you respond? The answer of course will depend on each client’s unique situation and circumstances.

For example, discussions with younger clients who won’t be retiring for decades will be different than those with middle-aged and older clients who are nearing their planned retirement dates. But here are some tips to consider as you think about how to help your clients adjust their retirement plans due to the pandemic.

1. Revisit Retirement Goals with Your Clients

The first step should be to talk with clients about their retirement goals and whether these have changed as a result of the pandemic. For example, is your client among the one-third of Americans who have changed their planned retirement date? If so, how will this impact their financial strategies?

Some clients may be unsure about whether they should change their retirement plans due to the pandemic. You can help them analyze their current situation to bring clarity to the question. For clients approaching retirement, you may want to help them review and potentially revise their plans about when and how to make the transition. This also provides an opportunity to help clients understand and prepare for an unexpected event such as a pandemic.

Other factors may also affect your clients’ retirement plans. During the Great Resignation, many Americans who left their jobs during the pandemic have decided not to return to work, some due to health concerns and some due to difficulty finding employment in their chosen field. Talk to your clients about how retiring earlier than planned could affect their retirement strategies.

2. Reexamine Your Clients’ Asset Allocations

You may need to adjust your clients’ asset allocations based on how the pandemic has affected their retirement goals. Recent stock market volatility is another good reason to take a fresh look at asset allocation and make changes to clients’ portfolios as necessary.

Younger clients’ asset allocations are less likely to need adjusting since they have more time to make up potential market losses. A retirement portfolio heavily weighted toward equities is usually appropriate for most young and middle-aged clients with a long-term retirement horizon. For older clients who are closer to retirement, or middle-aged clients who want to retire early, it might be appropriate to shift to a more conservative asset allocation mix.

3. Help Clients Plan Social Security Distribution Strategies

It’s critical to plan carefully for the best time to start claiming Social Security retirement benefits. Of course, the longer clients wait to start receiving benefits, the higher their monthly benefit payments will be. Your clients’ plans for when they want to retire will play a big part in their Social Security distribution strategies.

For example, suppose a client was originally planning to work until he reached full retirement age at 67 but now wants to retire at 62 due to the pandemic. Help him determine whether he can afford to wait until 67 (or later) to claim full Social Security benefits (or delayed retirement credits if he waits until after 67) or must claim reduced benefits at 62. The answer could have a big impact on portfolio drawdowns and how long his retirement portfolio lasts.

4. Examine Early Retirement Packages with Clients

Some clients may be receiving early retirement offers from employers who are looking to trim their workforce due to the pandemic. If any of your clients receive such an offer, you can play a valuable role by helping them understand whether they should accept it or not. Start by figuring out exactly what’s in the early retirement package.

For example, how much does the total payout compare to continuing to work for a certain number of years? And does the package include a lump-sum cash payout or annuity payments over a period of time? Some packages allow employees to choose a lump sum or annuity payments. If your client has this choice, help her crunch the numbers to decide which option is best.

Another important question is whether the package will allow your client to remain on the company’s healthcare plan? If it does, how much are the monthly premiums?

Also ask your client how secure her job might be if she rejects the package. Some employees have been laid off soon after rejecting early retirement packages. If your client believes this could happen, her best option might be to accept the package even if its terms aren’t ideal.

5. Help Clients Figure Out How They’ll Pay for Healthcare in Retirement

Healthcare costs are sometimes overlooked by people who want to retire early. But this is important because in most cases, Americans aren’t eligible for Medicare until they turn 65. So if a client plans to retire before this age, she will need to have a plan for how to pay for healthcare expenses.

Often, the best option is to remain on an employer’s health plan if this is allowed. If it isn’t, your client can look into purchasing a private health insurance policy or a policy through the federal government’s healthcare exchange at Of course, these policies will be relatively expensive for clients who don’t qualify for a government subsidy.

COBRA might be another option, though this is also relatively expensive and only lasts for a limited time. Or your client might be able to join a spouse’s health insurance plan if he or she is still working. Faith-based healthcare cost sharing plans like Medi-Share and Liberty HealthShare are a more nontraditional option that might work for some clients.

Adding Value to Client Relationships

The shakeup that the pandemic has caused in retirement planning presents a unique opportunity to add value to your client relationships. Be proactive by thinking ahead of time about how you can answer your clients’ questions about pandemic retirement planning and help them adjust their plans if necessary.

Gino DeRango is a Senior Vice President at Axos Advisor Services.

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