It’s been 15 months since COVID-19 turned our personal lives and the economy upside down. For those who lost loved ones, jobs, and/or businesses, life will never be the same.
To get by during the pandemic, some have had to tap into retirement accounts for money to live on. But even before COVID, Americans as a whole were financially unprepared for retirement. Research consistently shows 50% haven’t saved enough to maintain their standard of living during their post-working years.
If that wasn’t scary enough, some people don’t even have retirement accounts. And a large number of Americans still expect Social Security benefits to make up half of their retirement income.
What does this mean? In the wake of the pandemic, even more consumers are worried about having the resources to retire comfortably. According to the Pew Center, 50% of adults who aren’t yet retired say the economic impact of COVID on their finances will make it more difficult to reach their retirement goals.
Here are some ways you can ease clients’ investment fears and help them get back on track – or on track if they don’t have a plan.
Focus on long-term retirement goals
When a market downturn occurs, it’s not uncommon for consumers to become anxious about their assets. They’re looking at the short-term losses, not potential long-term investment gains.
Remind them that markets fluctuate. What goes down will eventually go back up. Work with your prospects and clients to devise a strategy that addresses their financial needs now, if they’re already retired, and into the future if they’re not.
In addition, retirees who can avoid drawing Social Security until full retirement age should do so. This is because if they choose to take Social Security benefits the first year they’re eligible, at age 62, they will reduce their monthly income permanently up to 30%. For maximum benefits, they should delay until age 70, if possible.
Weigh whether to rebalance assets
What if your client’s investment fears prompt them to suggest a rebalancing of their portfolio? That’s the time to do “a financial, estate and risk management gut-check,” says Forbes contributor Leon LaBreque, chief growth officer of Sequoia Financial Group.
When reviewing accounts, LaBreque recommends:
- Examine asset allocation, identify any orphan accounts such as leftover 401(k), and IRAs; know any and all fees, and determine if the investments align with your financial goals.
- Confirm your will, trusts and beneficiaries are up to date; real estate titles are accurate, and your digital legacy protected.
- Is your insurance coverage sufficient for your needs and have you pursued discounts for your coverage?
- Do you have a current list of your debts, have you considered loan consolidation; and can you – and should you – raise cash?
According to Vanguard, rebalancing can create a tighter return distribution and less volatility.
Explore annuities as income generators
For some individuals, an annuity may be the right financial vehicle to provide income after they stop working. It can also help ease their investment fears.
Be sure your prospects and clients understand exactly is a product sold by financial institutions, like a life insurance policy. However, it differs in that an annuity pays the account holder or their designated beneficiary in installments while they are alive. Life insurance benefits pay after the insured party dies.
As an advisor, you know there are pluses and minuses to annuities. Yes, they generate income in retirement. The right type of annuity can pay out for the contract holder’s entire life. But there are annual fees with annuities – as much as 3% per year. So make certain you explain the various types of annuity formats with clients to ensure they choose the one that fits their needs.
Reach consumers with LeadingResponse
Your clients turn to you for your expertise in financial matters and to calm their investment fears. You, in turn, can count on LeadingResponse to attract, engage and acquire new customers. Learn more about how we partner with advisors to help them scale up their businesses.