How to Recalibrate Your Retirement Planning During COVID
The pandemic has had serious financial implications for many employees, forcing some to recalibrate their long term goals when it comes to retirement.
Employees appear torn over the best course of action, with some choosing to retire early while others plan to work longer to make up for lost income during COVID. Employers are stuck in the middle, working to meet these disparate groups.
“The biggest challenge employers seem to face is creating training opportunities for employees approaching retirement,” says Brad Hindman, financial advisor at Wells Fargo. “If the goal is to make them feel confident and comfortable with their decision to retire, employers should respect them on their terms. “
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Older workers are more worried about not having enough time to recover from COVID, with 34% of employees aged 68 to 70 planning to delay their retirement, according to a study by The Pew Charitable Trusts. On the flip side, more than a quarter of all employees say COVID has caused them to postpone their retirement dates, according to the National Institute for Retirement Security.
“The pandemic has amplified some people’s desire to retire earlier and caused this epiphany moment for a lot of people, where they take a step back and say, ‘You know what, I have to make a change’, Hindman said.
Hindman shared his thoughts on how he saw COVID impacts retirement planning, the steps employers can take to better educate employees about retirement and financial well-being, and the biggest financial lesson from the pandemic.
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Have clients changed their retirement schedules due to COVID?
I am thinking in particular of customers in the utility industry, like natural gas companies and electricity providers, where there have been layoffs and closures that have affected people in financially significant ways. In most of these cases, unemployment benefits have eased the burden. However, it is not the same as working, so they had to tap into savings and retirement accounts, which ultimately delayed their retirement. Having to take on more debt leaves them in a situation where they may have to work longer.
How can employers help these employees in financial difficulty, to help them better secure their retirement years?
It’s really all about educating the employees, which can be a tough thing to do from an employer’s perspective because you can’t always get a high level of participation. There are a lot of great websites out there for employees through their 401 (k) plans or HR, but the HR I talk to say they’re not being used as much as they should be. Just because it’s not good information, it’s just that it isn’t reaching the people who need it most. There are several reasons for this. The average age of our customers is around 62, so they may just not be as tech savvy as the younger generations.
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[At Wells Fargo,] We have joined forces with human resources managers to come and do general training on finance. We discuss things employees should consider as they approach retirement, like costly mistakes to avoid, and how health care benefits will work after retirement. The employers we work with directly say that when they come in to try and help educate clients, that face-to-face interaction is really what drives people to make changes.
What is the biggest financial lesson learned from the pandemic?
We have to get back to basics. When I think about financial well-being, I think about being prepared for things that can happen that aren’t necessarily good. It’s about setting up emergency or health savings accounts and really educating employees about it.
Employees don’t always trust their employers, and sometimes when things are presented to their advantage, employees think there is an agenda. So it just comes down to having a good relationship with employees and nurturing those things educationally that will build that trust and translate into better outcomes for both parties.