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- It’s difficult to plan for retirement during an economic downturn and global health crisis.
- Financial adviser Chip Munn says people’s biggest concerns about retirement still ring true, but with added complexity: “Will I run out of money?” and “What will I do with my time?”
- Healthcare costs have always been a wild card for a lot of retirees, and the pandemic may worsen the problem.
- It terms of planning for free time when you’re no longer working full-time, Munn says “this is almost like a test run for some people.”
- SmartAsset’s free tool can find a financial planner to help you take control of your money »
In just a few short weeks, the coronavirus pandemic has upended nearly every corner of American society.
The sudden economic downturn and persistent health crisis can feel like an especially harsh blow to people who are in or nearing retirement — a stage in life when your future is usually painstakingly mapped out.
“This is kind of like a medically induced coma,” Chip Munn, financial adviser and CEO of Signature Wealth Strategies, a South Carolina-based advisory firm, told Business Insider.
The economy, Munn says, has been metaphorically put to sleep as we attempt to battle the illness. “The question mark will be how it comes back when we begin the process of waking it back up,” says Munn, whose new book “The Retirement Remix” encourages people to reconsider the notion of putting off fulfillment or goals until after they “clock out” of the workforce.
Generally people share two big concerns when it comes to retirement, Munn says: “Will I run out of money?” and “What will I do with my time?” Those concerns are ever-present, he says, but the coronavirus pandemic has added a new layer of complexity.
Will I run out of money?
Munn says an overarching concern most Americans have about retirement is whether their money will last. That fear can often be mitigated by creating and following a financial plan. But in the current state of affairs, there are more unknowns to contend with.
“I think the big question mark coming out of this is going to be healthcare costs, because there are things that people don’t typically plan for anyway,” Munn says. While people usually can predict what their monthly expenses will be for housing and food and other lifestyle costs, he says, healthcare is more often a wild card — and an expensive one at that.
“For 18% of people, their out-of-pocket medical costs average about $4,300 a year, or more than 50% of their Social Security. And for 6% of people, they’re more than 50% of their total income,” Munn says, citing an October 2017 report from the Center for Retirement Research at Boston College.
“You had a pretty clear projection of what the inflation rate for medical services was [before this], but I’ll be interested to see how that changes after the toll that this seems to be putting on the system overall,” Munn says.
“The good news,” he says, “is that you do have some discretion in lifestyle costs. You can make changes there.”
What will I do with my time and how do I stay engaged?
“This is almost like a test run for some people,” Munn says in reference to stay-at-home orders and the seemingly slower pace of life that has followed.
“I always like to ask people — most people are either retiring from something or retiring to something. You’re retiring from a job that you hate or you’re retiring from a boss that you don’t work well with. You know, you’re trying to get away,” Munn says. “In an ideal world, you want to plan to retire to something; you want to retire to travel more, to spend time with your grandchildren, whatever it is.”
When people retire from something, he says, they often struggle because they’re not as prepared for whatever it is they wind up doing. Right now, people who are staying home or out of work might be getting a taste of what is important to them beyond their job commitments and forming a fuller picture of how they want retirement to look, Munn says.
“What I’ve learned from this crisis is — people of all ages, but if you look at the US — it’s kind of a microcosm of retirement, and you need four things,” he says.
“You need a plan. You need a schedule — I don’t know about you, but it took me a while to get used to not going to work, working from home. That’s a very real thing for people who retire, is all of a sudden they’re going through that kind of change. And then you need a purpose and a community, and we’ve seen a lot of that,” Munn says.
Ultimately, the people who are successful in retirement consider not only the financial side ahead of time, but the emotional impact as well.
“If you have a plan, I think this has been a great stress test for it and it’s a good opportunity to make sure that it’s up to date,” Munn says. “If your goals change, then you would want to change your plan also. It’s like going on a trip — if you change your destination, probably best to also change the GPS.”
- Read more on managing your money in this tumultuous time:
- 3 options for people struggling to pay their mortgage during the global health crisis
- 4 reasons to get disability insurance, even if you don’t think you need it
- If you’ve been financially impacted by the coronavirus, you may be able to pause payments on these 8 bills
- How to get a stimulus check from the US government, which could pay up to $1,200 if you qualify
- In response to the coronavirus, credit card issuers like Amex and Capital One are letting customers skip payments without interest and more
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