How the Pandemic has Reshaped the Way We Look at Retirement

Q. My husband and I have been working for nearly 35 years each and are due to retire in the next few years, but things seem uncertain for everyone now. My understanding is that the pandemic has added new challenges to the retirement plans of many people, putting some out of work and pushing some to dip into their savings. The financial shortfall is prompting many friends of ours to change their retirement plans and adjust their expectations. As the number of COVID-19 cases across the country continue to skyrocket, my husband and I are concerned about what it means for retirement. Is there any information on how coronavirus is changing retirement for Americans so we know what to expect? Thanks!

A. You’ve been working for a long time, and similar to many Americans, you have started looking forward to retirement.

As you likely know, it takes a lot of planning to retire, and you may or may not feel you’ve done enough to enjoy a comfortable, worry-free life after work. And like you said, the coronavirus pandemic has set changes in motion that will likely change how Americans retire.

What Will Retirement Look Like?

As the pandemic wreaks havoc on our mental and physical health, it is also quietly reshaping how Americans will face retirement and old age in the years to come. The pandemic has shaken up many Americans’ retirement plans, whether they feel the need to delay retirement or will have to adjust their expectations of what retirement will look like. While the future may be uncertain, there are a few things that will likely change when it comes to retirement, as follows:

• Americans are Adjusting Expectations and Altering Plans: Many retirees are frustrated that the virus is interrupting plans to travel and see grandchildren. But the break from routine has also freed up time to assess plans, values and the kind of legacies we want to leave, as well as expectations, and make adjustments, if needed. More and more people are re-evaluating what’s important in their lives and changing their plans.

• Government Programs Will Likely Expand: Dr. Pinchas Cohen, dean of the Leonard Davis School of Gerontology at the University of Southern California, predicts that federal or state governments will expand programs, including one under Medicaid, that pay some family caregivers, typically an adult child. Generally, the amount depends on an assessment of the elderly individual’s needs, as well as the average wage for a home care aide in the state and geographic region in which one lives. Community-based programs will also likely expand, including the Program of All-Inclusive Care for the Elderly, a combined Medicare and Medicaid service that is currently helping approximately 50,000 people with such needs as medical services, day care, home care and transportation.

• Older people will benefit from a technology boom: The pandemic, and the aging of the population, is contributing to a wave of innovation aimed at older adults. The most dramatic change under way is the growth in telemedicine, facilitated in part by Medicare’s decision since March to expand reimbursement to doctors for virtual visits. Wearable devices and diagnostic tests for home use will provide doctors with key information, including patients’ blood pressure and weight, and pave the way for better remote patient monitoring. Laurie Orlov, a consultant who specializes in technology for older adults, says Amazon’s Care Hub, free in the Alexa app, uses voice technology to notify an emergency contact if a user asks for help. Please read today’s Critter Corner for more details on Amazon’s Care Hub.

• Lifespans will decline: With people dying of Covid, virus-related deaths are projected to reduce the aggregate life expectancy of Americans age 65 today by nearly a year, according to researchers at Princeton University and the University of Southern California. Covid-related lockdowns also are likely to reduce the life expectancies of those who avoid or survive the virus, as well, as studies indicate that loneliness and isolation may be linked to a greater risk of death, cognitive decline, depression and heart disease. Technology can help overcome some of these problems. But online platforms such as Zoom are far from a perfect substitute for the human contact we need.

• Finding meaning: The virus has enhanced the feeling that “life is short.” What matters now more than ever is finding meaning and doing what really matters to us, whether that is to be good to people or study classical music or make the world better through commitment to a cause.

• We will plan for death: End-of-life planning is something many put off. But thanks to COVID, it feels more pressing, even for younger people. As difficult as it is to plan for death, experts say it is crucial that people prepare. It can improve not only how we live our last days, but how our loved ones deal with our deaths.

• We will embrace healthier lifestyles: “The older you are, the greater your statistical odds are of dying from the coronavirus. But underlying health problems, including diabetes, heart conditions and obesity, are also significant risk factors,” says Dr. Pinchas Cohen. Such conditions can be caused by factors beyond our control, including genes. But diet and exercise also often play a role, which is why we should embrace healthier lifestyles!

• We need to save more to retire: When planning for retirement, the truth is that the earlier you start saving and investing, the better off you’ll be. And even if you began saving late or have yet to begin, it’s important to know that you are not alone, and there are steps you can take to increase your retirement savings.

For years, retirees have relied on the so-called 4% rule, which says you can withdraw 4% from your savings in the first year of retirement, and then give yourself an annual raise to account for inflation, without running a big risk of running out of money. For example, for someone with a $1 million portfolio, that formula produced an initial income of $40,000 and—assuming inflation of 2%—an increase to $40,800 in year two.

According to David Blanchett, head of retirement research at Morningstar Inc., the safe-spending recommendation is now between 3% and 3.5%. That means that someone who wants to safely withdraw $40,000 in the first year of retirement needs to save closer to $1.2 million than $1 million.

• Our views on aging will change: Surveys and studies show that many are noticing in their own lives that older adults are psychologically more resilient in the face of the disease than younger people are. Psychologists are also finding that people across generations are focusing on what matters most to them, including relationships. Amid COVID, there are some signs of a deeper understanding of how we need each other.

How Has the Pandemic Reshaped the Way You Look at Retirement?

As yourself these three questions: What would you do if you had all the time and money in the world? How would you live if you knew you had only five to 10 years left? And what would you most regret, if anything, if you died tomorrow? Think about these and other things that are important to you and begin your planning today!

Plan in Advance for Retirement

If you’re worried about your retirement during these turbulent times, the best thing you can do is to plan! Whether your retirement is coming up soon or is many years away, it is important to protect your hard work and your golden years with effective retirement planning and long-term care financial planning.

Besides being a Certified Elder Law Attorney, I am also an experienced retirement planning advisor and long-term care financial advisor through my financial services company, Lifecare Financial Services, LLC, which has been in business since 2006.

Retirement planners, such as myself, generally work with people ages 55 and older, who are within 10-20 years or so of their desired retirement age. Learn more about our retirement planning services here. To get started on retirement planning, estate planning, or long-term care planning, please contact us to make an appointment for an initial consultation.

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