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Life Health > Annuities > Fixed Annuities

Climate Change and Retirement Planning

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What You Need to Know

  • Snowstorms and hurricanes have an obvious effect on homeowners.
  • They can also lead to injuries, climate-related illnesses and higher energy bills.
  • Clients might want to factor climate change into thinking about where to live.

Climate change is poised to affect retirement planning dramatically. Are your clients prepared?

“As if retirement income planning isn’t already a challenge, you must now factor in the high cost of climate change.”

There is now an added complexity to the planning process and a sense of urgency as climate change affects retirees. No matter if climate change is manmade, a natural cycle, or a combination of both, the economic, physical, and emotional toll of climate-change disasters has the potential to upend even the most solidly-constructed retirement plans.

Climate changes issues will likely influence many of your client’s future financial decisions. This could include relocation, how they will pay for the increased costs of goods and services, and additional money problems arising from catastrophic events. For this reason, 21st-century financial blueprints should include provisions for climate change.

As advisors, agents, and financial educators, we are tasked with helping our clients plan for the many elements that erode their wealth, such as inflation, longevity, taxes, and medical costs. Unfortunately, many of us haven’t given climate change a second thought. Advisors who think ahead and successfully adapt to climate change will become sought-after experts in their communities.

Health, wellness, and medical expenses will increase.

According to a recent report from the Natural Resources Defense Council (NRDC), climate change currently adds around $820 billion to health costs in the United States.

That amount is expected to increase exponentially in the next decade. These increased medical expenditures result from medical care needed after a natural disaster, wages lost due to climate-related accidents and injuries, and increases in chronic illnesses from climate-induced increases in air pollution.

Some holistically-minded planners provide discounted or free services such as gym memberships, yoga classes, dietary advice, blood pressure management, and other health-focused value-adds. These relatively low-cost options work wonders to position you and your firm as a forward-thinking agency concerned with the environment as well as the well-being of its clients.

Where will your clients live when they retire?

As temperatures rise and weather-related disasters become more frequent, retirees may re-think flocking to traditional retirement meccas such as Texas, Arizona and Florida. Whether to relocate or downsize has always been an issue for those about to retire. Climate change further complicates these decisions, meaning retirement planners must get and stay ahead of the curve for “green” retirement design.

Higher costs for energy, food, water, and insurance could devastate retirees.

The rising price of electricity, natural gas, and heating oil affects nearly all your senior clients. Climate change will drive up costs for heating and electricity, directly affecting a senior’s lifestyle in retirement. Savvy advisors will incorporate these cost of living spikes into their portfolio designs and help clients find ways to safeguard their savings.

Adding a natural disaster component to a financial plan makes good sense. For example, suppose you have pre-retiree clients who own property in flood zones along the coasts, near river basins, or in areas prone to wildfires. In that case, you must help them factor increased insurance costs into their plans.

Less affluent seniors, many dependent on senior services, food banks, and other programs, will likely see these services strained by climate change and demographic shifts due to an aging population. Social safety nets may fray, becoming unstable and leaving the unprepared struggling to survive on fixed incomes.

To sum it up: Climate change will impact us all, especially those planning to retire in the next five to 10 years. However, climate change issues may afford opportunities for forward-thinking agents and advisors to set themselves apart.


Bill DugganBill Duggan is a retirement planner at The Retirement Advantage, in Almont Michigan.

(Image: 24Novembers/Shutterstock)