As the definitions of work and what it means to be retired have evolved, planning for this stage of life looks very different today than it did a decade ago. Some may say the greatest changes to retirement planning have occurred since the COVID-19 pandemic.
No matter where your clients are in their retirement planning journey, it's important to know how these changes may have shifted their priorities and what's keeping them up at night. Here are five reasons why retirement planning is changing for your clients and how you can guide them through these transitions so they can be better prepared.
Retirees must plan for much longer life spans
While most Americans who have reached age 65 can expect to live for another 20 years, it's best to encourage your clients to plan for even longer than that if they are healthy. That also goes for younger clients, as anyone aged 20 and under today can expect to live to 100 and beyond, according to the World Economic Forum. Living longer means they'll either have to work longer than anticipated — or find ways to put aside or invest more money so they can enjoy a longer retirement.
Medical care costs continue to rise
It's expected that healthcare costs will continue to rise and more people may have to pay out of pocket for certain services. Globally, the number of people over 80 years of age is expected to triple by 2050, as will the number of older adults requiring long-term care. When crafting your clients' retirement plan, make sure it accounts for the Medicare coverage they need while also budgeting for any additional costs such as private health insurance.
People are working past retirement age
According to data from the Bureau of Labor Statistics, almost 11 million Americans over the age of 65 work either part or full-time today. Some seniors are planning to work past 70 or never retire at all — a major shift compared to a decade ago. As planning to work later in life may not always turn out due to unexpected health issues or lack of opportunities, you should encourage your clients to have an alternate plan in case they need to make up for an income shortfall in retirement. You should also look at the impact that working past retirement might have on their Social Security benefits.
Shifting priorities post pandemic
The scale and medical impact of the Covid-19 pandemic may have caused your clients to adjust their priorities, giving further thought to the non-financial aspects of retirement planning or to the legacy they want to leave behind for their children and grandchildren. Prior to the pandemic, retirement may have meant significant changes in their day-to-day lives, but the rise of remote workplaces may lead to a smoother transition to retirement, semi-retirement or even self-employment for your clients. Make sure you discuss with them how their vision may have changed and whether vehicles for long-term retirement planning such as annuities might be appropriate for where they are in life.
Rising cost of living due to inflation
As the cost of living continues to rise due to inflation, the purchasing power of your clients' savings will decrease over time. Concurrently, they may be increasingly called upon to assist children and grandchildren with their living and educational expenses. As fewer retirees have access to a corporate pension, and traditional vehicles such as CDs and bonds are now underperforming, it's important to look at other ways to bolster your clients' savings.
Are your clients looking for flexible options to grow their assets and a source of guaranteed income? Learn how to talk to your clients about the benefits of variable annuities.
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