In addition to the pandemic’s impact on people’s health and emotional wellbeing, COVID-19 has taken a major toll on many Americans’ finances. As a result, you may have gotten some surprising calls from clients or discovered concerning developments when checking in with them.
After seeing record unemployment and an economy that came to a virtual standstill, many U.S. adults were forced to shift their retirement goals as a result of the financial impact. In fact, almost one in five (19%) indicate they’ve been forced to delay retirement or not retire at all.1
A poll conducted on behalf of The Nationwide Retirement Institute® also found these startling statistics about the pandemic’s impact on Americans’ retirement plans:
- One-fourth (25%) saved less or stopped saving for retirement1
- About two in five (37%) have or are likely to withdraw money from their retirement plan early1
- Nearly half (46%) are reevaluating their retirement plans to assess the financial impact of COVID-191
The Role of Financial Advisors
Helping clients address life’s uncertainties with confidence and developing strategies to overcome financial challenges are at the heart of any financial professional’s mission. These bleak findings present a major opportunity for financial professionals to show their value.
It’s all too easy for some investors to have a one-track mind when it comes to their retirement journey. When an unexpected event—like a global pandemic—requires a detour, they’re left with few options. This scenario stresses the importance of building flexibility into a retirement strategy to help investors pivot in stride.
Some findings in the study indicate investors’ willingness to seek professional advice. Three-in-ten (31%) U.S. adults sought the help of a financial professional for the first time because of the pandemic’s impact.1 Maybe it’s because nearly half (47%) of Americans feel their finances have become more complicated as a result of COVID-19.1
Among those complications are taxes, which many believe have also become more difficult since COVID-19. In fact, nearly two-thirds (62%) of Americans now think it’s more important to develop a strategy to address taxes in retirement than it was before the pandemic.1 The result?
Half of Americans would consider switching financial professionals to one who could help them plan for taxes in retirement.1
Certainly, in-depth tax advice needs to be given by licensed tax professionals, but financial advisors should have a basic understanding of the tax implications for different investment types. Educating clients about the differences between taxable, tax-deferred and tax-free income sources can help them make informed decisions and may help them feel more confident and secure.
Most annuities, for example, are tax-deferred, and clients typically aren’t taxed until they begin receiving payments. Of note is that two in five (42%) of those surveyed would like professional financial advice on how to use annuities and life insurance that may be less impacted by capital gains tax increases.1
In a post-COVID world, many investors remain leery due to continued market volatility and global uncertainty. Those who are more risk-averse and concerned about having enough income in retirement may find the guaranteed returns and tax-deferred benefits of some annuity products appealing. Other annuities may offer flexibility and opportunities to participate in market growth while still placing a limit on losses. Including annuities as part of a diversified portfolio might be just what your clients are looking for to stay on track with their retirement goals.
The pandemic has added another layer of complexity to investing and retirement planning. Use our Elevate Advanced Planning Resources that are specifically designed to help your clients through difficult and complex situations. Start leveraging these tools today by clicking below.
1Nationwide, The 2021 Nationwide Retirement Institute® Tax-Efficient Retirement Income Survey, March 25, 2021.