Why Retirement Planning Is Even More Important During a Pandemic (Part 3 of a 3-part Series)

Randy Smythe, 60, took an early retirement last September after a career in e-commerce sales and soon took off to spend a year visiting the national parks while renting out his home. Now, similar to most Americans, he’s stuck at home because of the coronavirus pandemic and still two years away from eligibility for Social Security, although he was hoping to wait until at least 65 to start collecting. Smythe is hoping to dip into income from his investment portfolio, though the value of his retirement account has dropped by about 25%. He’s also making an attempt at lowering his living costs to see himself through, but fears he may have to come out of retirement if that’s what it takes to survive.

The world has been in a state of panic since the outbreak of Covid-19, causing market volatility, loss of jobs, and an unexpected shift in plans for many of us. We all hope that there will be a vaccine on the horizon and things will get back to normal sooner rather than later. Given the current situation, however, it is now especially important to have a retirement plan in place to protect your financial future, especially if the economic damage of the virus takes longer to resolve than the medical crisis itself.

In part one of this series, I discussed why estate planning is of vital importance during this global pandemic. In part two, I explored elder law and planning for long-term care, and in part 3, I will focus on retirement planning.

Advice for Different Stages of Retirement Planning

Worried about making your retirement savings last during the current economic downturn? Concerned about stock market crashes that could derail your retirement in future years? Here are some things to keep in mind if you are already retired, within 5-10 years, or more than ten years out.

If you’re already retired or very close to retirement:

• If you did a good job in your retirement planning and you have a strategy in place for your retirement income, keep the strategy. It should ideally have been designed so that any major event in the market would have a minimal impact long-term.
• If you’re over 59 1/2, consider setting up a plan to make systematic withdrawals from your qualified retirement accounts, using tax bracket management designed to take advantage of today’s low tax brackets. Consider using these withdrawals to establish a Roth IRA, or putting this money and your other assets into an asset protection trust such as the Living Trust Plus® in order to protect your assets from probate PLUS lawsuits PLUS nursing home and other long-term care expenses.
• If possible, adjust your living expenses to match your retirement income from all sources.
• Protect against the risk of expensive health care conditions with smart choices for Medicare (if you are 65 or older) and supplemental medical insurance. Plan in for long-term care by considering the purchase of hybrid long-term care coverage.
• To increase your ultimate Social Security benefits, consider funding a Social Security bridge payment to delay Social Security benefits. To do this, on a monthly basis, you’d withdraw from your savings the amount of Social Security income you would have received if you’d started Social Security when you retired. Continue making these monthly withdrawals until you start your actual Social Security benefits. To fund your Social Security bridge payment, you can use investments that that protect against investment volatility. Examples include short-term bond funds, money market funds, CDs, or stable value funds. Use the bridge payment, and eventually your Social Security benefits, to help cover the cost of your “needs”—your basic living expenses.
• Consider using a portion of your retirement savings to buy a cost-effective fixed indexed annuity that will grow when the market grows, but will not lose money when the market goes down.
• If you don’t have an income strategy or are unsure of what it is, find an advisor you trust. 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.

If you plan to retire within the next 5-10 years:

• At this point, you should already have assets positioned for future income.
• If not, now is not an ideal time to sell any type of securities, particularly stocks. Instead, now is the time to check on the planning you’ve already done.
• A dramatic market plunge can delay your retirement depending on how long the decline lasts. If you’re 55 planning to retire at 65, it may mean pushing retirement off for a couple years.
• Maximize Social Security benefits by delaying the start of these valuable benefits.
• Consider working as long as you can, or try to find part-time work to supplement your retirement income.
• Maximize your income from traditional pension plans or cash balance plans, if you’re lucky to have earned significant benefits from these plans.
• If you’re over 59 1/2, consider setting up a plan to make systematic withdrawals from your qualified retirement accounts, using tax bracket management designed to take advantage of today’s low tax brackets. Consider rolling over these withdrawals into a Roth IRA or using these withdrawals to buy a fixed indexed annuity which can act as a personal pension — as mentioned above, these types of annuities grow with the market, but will not lose money during market downturns.

If you plan to retire in more than 10 years:

• If you’re working with a financial planner, you should already be thinking about a retirement plan designed to withstand the type of market volatility that we are currently witnessing, and that we went through during the 2008 recession. If you have not, it is time to learn from these past and current events and start taking your retirement planning seriously—whether you’re 45 or 65.
• View this time as an opportunity. Keep doing what you’re doing—which hopefully means making regular contributions to retirement accounts.
• Now is not the time to sell securities, and it is also not the time to drop a big wad of cash into any investment.
• When things get better, take calculated investment risks for the opportunity to grow your savings and retirement income.

Making Your Retirement Savings Last

Millions of middle-income, older adults are approaching their retirement years and are very concerned about making their retirement savings last, especially in these troubled times. Fortunately, there’s help available from a new study published by the Stanford Center on Longevity (SCL) in collaboration with the Society of Actuaries (SOA).

The SCL/SOA report contains many details that can help you personalize your baseline strategy to meet the common goals and circumstances that many people may have at this time, including making your retirement savings last while delaying Social Security as long as possible.

Plan in Advance for Retirement

If you’re worried about your retirement during these turbulent times, the best thing you can do is take charge! Whether your retirement is coming up soon or 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 10-15 years or so of their desired retirement age. Learn more about our retirement planning services here. Please contact us to make an appointment for an initial consultation. We offer videoconference or phone appointments in lieu of in-person meetings (but as an essential business we are still open for in-person meetings and document signings, of course carefully observing social distancing requirements and sanitary requirements). Wishing you safety, health, and protection during these difficult times.

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