America is facing a retirement crisis, which Covid-19 has only thrown into sharper focus.
Job losses and health concerns forced more than a million baby boomers to retire between February and September of last year, up from just 250,000 over the same period a year earlier, according to Pew Research Center analysis. A recent report by the National Institute on Retirement Security shows that among Americans who say they may have to change their retirement plans, more than two-thirds are retiring early as a result of the pandemic.
While the eventual toll of Covid on retirement is still being tallied, the goalposts have certainly moved.
Filing for Social Security, for example, is a cornerstone of retirement planning that may need a fresh approach. Early retirees are slated to lose trillions of dollars in benefits by claiming them too early, according to columnist Mary Beth Franklin, who wrote about the topic in last week’s issue. While some workers are enjoying the freedoms of working from home, many others have lost their jobs and may be forced to live off reduced payouts for the rest of their lives.
Because of those recent employment exits, annuities have come into new focus as one of the leading recommendations for near retirees. While they’re an important investment vehicle, they’re also poorly understood by many consumers, which puts people at risk of being sold inappropriate products. In last week’s cover story, IN retirement reporter Emile Hallez argued that some clients are being sold annuities in amounts that represent an outsized portion of their savings.
Then there’s the effect the pandemic is having on financial outlooks for women — a segment of the population already facing a retirement crisis of its own. While working from home, women have taken on more household duties and childcare, according to research, and are now more likely to consider leaving the workforce.
The trend is so pronounced that prominent women in wealth management, like Sallie Krawcheck, have dubbed the recent market downturn a “she-cession.” Those decisions could have broad-ranging implications on women’s retirement outlooks.
While women are facing outsized challenges, they may also serve as the canary in a coal mine for the retirement readiness of the entire country. There are concrete issues in the retirement landscape that have been amplified since the country closed up shop last March. Now is a good time for advisers to revisit retirement plans and make any necessary changes to help clients navigate potential pitfalls.
As the country begins to reopen for business, advisers may want to take stock of a year that altered the retirement plans of millions of Americans. By assessing any new risks or dangers that may have emerged, advisers can make sure the appropriate strategies are still in place.
There could be tens of thousands of dollars on the line for individual households, which could be a necessary avenue for clients to reach their retirement goals.