3 Ways to Keep Retirement Plans on Track During the Pandemic

“Many advisors get afraid to reach out to their clients,” she said, noting they often “don’t want to give bad news, but we find the more successful advisors [are] proactive” and contact clients to discuss their retirement goals and other issues during times like these.

The same goes for a potential client that an advisor may have spoken to a few months back who didn’t select that advisor, she said. Maybe they will select the advisor now if that advisor provides them with important information they can use that their own advisor did not, she noted. This is “a great opportunity for those advisors to follow back up” with such investors, she stressed, adding it is a good idea to reach out to clients with significant good or bad news.

This is also a great time to reach out to clients who may be confused about whether it makes sense for them to continue contributing to their retirement plans or hoard cash instead, she noted.

2. Don’t rule out a hardship withdrawal.

If clients are not working, they may be worried about taking money out of their retirement plan. And, despite typically stressing that their clients never take an early withdrawal from their IRAs or work retirement plan, advisors should definitely reconsider that advice this year depending on their clients’ specific situations, Clauson noted.

“What I love about the CARES Act is the fact that if you need the money to pay your rent, to feed your family, you should absolutely take it” now because there is no 10% early withdrawal penalty this year, she said.

“As much as every financial planner would tell you don’t touch that retirement [money] until you’re 59 and a half … if it truly is about having to feed your family” — or paying the mortgage — “of course you do that,” she said. Although you still have to pay the taxes on that withdrawal, “you get to spread the taxes over three years — and you can just put the money back within three years,” she pointed out, adding that, after all, “we hope that all of this will be behind us within three years, so it doesn’t have to completely delay your retirement plan.”

3. Urge your clients to build up their savings.

Advisors should also use this time to strongly urge their clients — including clients running their own businesses — to save as much as possible. The pandemic is “really bringing to light the need for that emergency savings plan,” Clauson says. Although few would have predicted a pandemic, there tends to historically be some major crisis of some sort every few years, she said, pointing to the “tech bubble,” 9/11 and the last recession as examples.

Without six months to a year of emergency savings, investors may indeed need money from their retirement to pay their mortgage or feed their family, she said. But it really should be a “last resort” to take money out of a retirement plan in most cases, she said.

Also, if your client is an employee that’s still working, this is a great time to make sure they are maxing out contributions to a tax-deferred retirement plan, she said.

Advisors should also not be afraid to discuss the ideas of learning a new skill, changing professions or moving to a different state, especially if a client has lost his or her job, she said.

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• Unwrapping RMD Waiver Details in CARES Act