Pulling the Plug: Earlier retirements prompted by COVID spur financial planning

COVID has affected myriad aspects of life. But for people 50 and older, it’s provided the impetus to retire earlier than they’d previously considered.

“They want to spend more time with their spouse or their grandkids or travel,” said Autumn Soltysiak, a partner and wealth management advisor with the firm Hemming& Wealth Management.

Soltysiak

She’s not the only one to make that observation. A recent article in Bloomberg News shared a survey by the New York Federal Reserve in which Americans say it’s increasingly unlikely that they’ll work deep into their 60s.

Thompson

The share of respondents expecting to work past the age of 62 dropped to 50.1% from 51.9% a year earlier, the lowest on record in a study that’s been conducted since 2014. The number of respondents who said they’re likely to be employed when they’re older than 67 also dropped, from 34.1% to 32.4%.

Another trend observed by financial advisors is clients getting more directly involved in their investments or portfolio.

“There’s more emphasis on planning,” said Heidi Thompson, managing director and financial advisor at Prout Financial Design.

Company founder Dennis Prout agreed. He says he sees clients who are nearing retirement looking more closely at their options.

Prout

“There’s been an increase in planning demand by 20% to 30%,” he said. “People are more serious, more intentional.”

Larry Avery with Advanced Financial Group, Inc. agrees with that assessment. In fact, he says that regardless of their financial situation, the one truism he shares with all his clients looking at retirement is that planning is the key.

“Every client has a unique financial and life situation, so there is no ‘one size fits all’ panacea in retirement planning,” he said. “I tell every one of my clients when they tell me they are pulling the plug at work, ‘You’d better have a plan for what you are going to do in six months. One can only golf, fish, sew, ski, read, sleep, swim, hunt, shop, bowl or watch ‘Gilligan’s Island Rerun Festival’ for so long.’”

Another trend: That serious consideration of retirement is trickling down to younger workers as well.

“The average age (of clients) is coming down,” said Prout.

Thompson says those in their 50s and early 60s are taking a closer look at their financial situation.

“They say, ‘Now I’ve got to think about this,’” she said.

Soltyziak says many clients looking at early retirement aren’t looking to stop working, but rather work on their own terms.

“They want to retire from 9 to 5 and go into consulting, or work part-time,” she said. “They want to control their experience.”

That’s not just a local phenomenon. A survey by the Indexed Annuity Leadership Council noted that 54% of Americans would consider working part-time to supplement their retirement income. That number rises to 69% among those considering retiring in the next five years and 73% among those planning to retire in five years or beyond. Bloomberg posits that the data reinforces other research pointing to a wave of early retirements triggered by the pandemic.

The pandemic also issued in what might be called “the Zoom age.” Telehealth appointments and companies holding virtual meetings via Zoom, Microsoft’s Teams and other software applications have become commonplace, precluding the in-person meeting risks.

But that doesn’t mean the virtual world should replace all in-person meetings, says Prout.

“Zoom (is) a 60% solution,” he said, noting that meeting face-to-face enables both parties to interact with one another at a deeper level.

“People are eager to get in and see us in person,” said Shea Petaja, the firm’s chief experience and marketing officer.

Another aspect of the Zoom age: Those who aren’t looking to completely retire have more options than previously.

Soltysiak said the option of virtual work can give early retirees the flexibility they want while still working.

“A lot of clients want to mix things up,” she said.

What will be the end result of the pandemic’s impact on the economy and retirement? While it’s too soon to tell, changes are likely in terms of both how people plan and react and how the industry responds.

Avery notes that the unpredictable nature of such variables is what makes the field fascinating for him and other wealth advisors. It also forces them to keep abreast of changes, be they attitudinal or technological.

“How the financial industry develops new products as times change and the world turns makes it interesting,” he said.

 

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