As far back as I can remember, I have always had bad eyesight. My mother would tell you that I sat too closely to the TV but the truth is I was dealt a bad hand! However, since 2010, I’m proud to say that my eyesight hasn’t gotten any worse. Thus, you can understand my excitement when I finally made it to the eye doctor this year and walked away with my new prescription: 2020 vision.
Unfortunately, I came to learn that 2020 vision is the exact opposite of 20/20 vision. While 20/20 vision implies clarity, 2020 vision can be defined as uncertainty – the central theme that we’ve all experienced this year.
Uncertainty means that aspiring retirees have even more considerations when answering an already difficult question: am I prepared, both financially & mentally, to retire? As wealth advisors and fiduciaries, it’s our role to help clients craft a comfortable answer to this convoluted question. Through these collaborations, retirees are re-evaluating 2 key elements of their financial plans when thinking about retirement:
Changing of Priorities
One of the first steps in creating a plan during COVID-19 is identifying your goals and prioritizing them based on their importance. Let’s try an exercise: close your eyes and envision the word retirement – what do you see?
If you pictured palm trees swaying, waves crashing in the background, and the weight of a refreshing beverage in your hand, you’re not alone! Per a recent Schwab study, 91% of Americans identified travel/vacation as a top priority when they’ve finally retired.
As we know, travel during COVID is not an option for many people. The result? Retirees are reconsidering what to do with their time. Conversations with retirees are now centered around their increased desire to spend more time at home and with family. From a financial standpoint, this change in priorities translates to adjustments in your plan – downsizing into a smaller home makes sense quantitively, but is the extra space important since you’ll be at home more often? Moving to that condo in Florida sounds warm & comfortable but are you too far away from family? For any financial plan, it’s critical to continually reassess your goals and how your accumulated assets can help realize them – now more than ever with the world’s changing landscape.
If you keep current on personal finance concepts, you may be familiar with how the “retirement” framework has evolved into a “financial independence” (FI) framework.
|Generally retire at a set age (~65)||Accumulate wealth so you can choose to work|
|Work and save modestly||Focus on earning or save more while younger|
|Spend more liberally during working years||Conservative spending during working years|
An example of FI being put into practice is that before the pandemic, almost 40% of people continued working in either a full-time or part-time capacity even after they’ve officially “retired” (Schwab, 2020). Why? 66% of retirees believe it’s a key component for healthy-aging. Continuing to work after retirement is also important for social interaction and keeping the brain active as retirees age. Again, the key distinction here is that these folks don’t need to work but choose to because they want to.
Snapping on 2020 vision, FI is more prevalent than ever as COVID has altered the way we work. Gone are the days of 9-to-5 in the office – instead, we’re experiencing the freedom of working remotely. If you’re approaching your desired retirement age, it’s possible you’re already financially independent and have more flexibility than you think. Instead of working full-time for the next two years, consider shifting to a part-time gig and working for an additional four years. Here, you have the added benefit of accomplishing your retirement goals earlier.
2021 Vision and Beyond
If 2020 vision is causing you to reconsider your goals or priorities, what are the next steps? The first is to update your written financial plan so that it is current. If you don’t have one, we recommend that you get one in place. The second step is to simply discuss it with a financial professional. You can only adapt your plan if you understand the implications of your changes.
As we flip into the new year, the last thing you want to do is miss out on your 2021 vision.
Transamerica Center – Retirees and Retirement Amid COVID-19 20th Annual Transamerica Retirement Survey of Retirees
 Examples include a dwindling Social Security trust fund (of which a Schwab study indicates makes up 24% of a Boomer’s retirement income), a seemingly uncorrelated faltering economy and booming stock market (savings & investments make up 41%), and an at-risk demographic for severe coronavirus symptoms (per Schwab Modern Retirement Survey, 2020)
 Schwab’s Modern Retirement Survey conducted in October 2020
 Schwab Modern Retirement Survey (2020) reports that 54% of retirees have prioritized spending more time at home and 45% want to spend more time with family
 Ultimately, all FI means is reaching a point where you have saved enough in assets to support your preferred lifestyle. This can happen as late as age 80 or as early as age 40.
 65 is when you qualify for Medicare and then shortly after, you reach Full Retirement Age (66/67) and are able to collect your full Social Security benefits
 Staying active, keeping their brain alert, having a sense of purpose, and maintaining social connections (Schwab Modern Retirement Survey, 2020)
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