What You Need to Know
- Quiet clients may be nervous clients.
- Nervous clients may be more open to hearing advice about retirement income planning.
- Everything hinges on knowing what's coming in and what's going out.
As we pass the one-year anniversary of the World Health Organization officially declaring COVID-19 a pandemic, it’s a logical time for many Americans to assess the state of their finances and prospects for a successful retirement.
Although markets have performed relatively well, after some initial volatility, between high unemployment, limited ability to make retirement savings contributions, and the potential need to tap into emergency funds, 2020 was a turbulent year that left many questioning the state of their financial future.
Unfortunately, your clients may be experiencing some of this uncertainty and looking for guidance on how they can better manage against risks of future economic events that can have a negative effect on their retirement savings.
But why is this so important to address with clients right now?
Because clients may be feeling more stressed about the economy and health of their finances than you realize.
According to the 2021 Retirement Risk Readiness Study from Allianz Life Insurance Company of North America, nearly seven in 10 (69%) Americans (ages 21 and older in 2007) said they believe the COVID-19 pandemic will have a greater overall economic impact than the Great Recession.
Furthermore, over half of all respondents (56%) said the pandemic will also have a greater impact than the Great Recession on their personal finances.
The survey also found a majority of Americans reporting far greater anxiety today than after the Great Recession about many financial issues, including day-to-day finances, retirement savings, and the stability of their professional career — and rightfully so.
Things like an earlier-than-planned retirement or general lack of financial preparedness are realities that put savings and retirement income plans at risk.
Rays of Hope
There is some good news. There are signals it may be an optimal time for a retirement planning conversation.
Despite, or possibly due to, the obvious financial strain caused by the pandemic, nearly two-thirds (65%) of survey respondents said that they are paying more attention to what they are saving and spending, and near-retirees (those within 10 years of retirement) are more active in pursuing a variety of strategies including:
- Saving enough in a retirement account
- Diversifying their retirement savings
- Researching expenses and risks associated with retirement
- Making a formal plan with a financial professional
- Purchasing a product that provides a guaranteed source of income
How to Help
One way to help your clients address these issues and feel more confident is through retirement income planning. This can identify any potential income gaps and develop solutions to help attain lifestyle goals in retirement.
1. Understand your client’s retirement risks
In the income phase, the amount your clients have saved for retirement is subject to a variety of risk factors as they begin to withdraw funds. By working together in identifying these risks, you can begin the process of developing strategies to help minimize the effects these risks may have on their retirement savings.
2. Track expenses
More to the point, not only will your clients need to track their expenses, those expenses will need to be prioritized into three distinct categories; Essential (needs), Discretionary (wants) and Legacy (desires).