Helping investors ‘weatherize’ their retirement dollars

The economic recovery is gaining momentum, yet inflationary pressures are mounting, and markets are responding. While this is a normal part of a healthy economic cycle — production declines followed by growing resource constraints as demand increases — COVID-19 has left us a bit shaken.

The impacts of the pandemic have raised important questions for investors, particularly those in, or nearing, retirement. Could inflation be here to stay? How should those nearing retirement respond? What does all this mean, particularly when interest rates are low?

In the current environment, retirement savers are looking for solutions that offer growth opportunities while limiting downside risk. Investors will appreciate a financial adviser who truly understands their needs and helps them put their money to work. By addressing their concerns, you will help them sleep easier — and solidify your seat at their financial table. When recommending retirement solutions, keep the following objectives in mind: 

Combat inflation pressures. Uncertainty remains in the wake of Covid-19, and those nearing retirement or already retired are worried about the impact the pandemic could have on their financial picture. Recent studies show that investors ages 59 to 75 are troubled that inflation could derail their investments and have concerns about finding steady retirement income. To help address these worries, advisers should speak to clients to ensure that their spending plan addresses inflation concerns and avoids crushing their savings. That could mean having an appropriate amount of equity exposure to meet rising costs balanced with more stable investment vehicles.

Combine growth while minimizing risk. Retirees continue to have fears about outliving their savings, so they "self-insure" their retirement by underspending and limiting their desired retirement lifestyle. While this behavior is understandable, advisers can help clients achieve their financial goals by maintaining an appropriate level of equity exposure. Research shows 3 out of 4 financial professionals agree low interest rates make it necessary to invest more in stocks. Further, more than 80% of financial professionals and consumers are concerned about insufficient returns on fixed investments. Advisers can identify solutions that provide clients with the opportunity to combine the equity exposure with existing safeguards; helping retirees gain confidence to spend the assets they have worked so hard to accumulate.

Create flexibility. Because recent events have impacted so many facets of consumers’ lives, including the way they approach their personal finances, flexibility is key for investors who want to pivot their plans and adjust portfolio allocations to align with their current risk tolerance. There has been an uptick in investors looking for solutions that enable them to have the flexibility to dial up risk by allocating more to equities or to dial up principal preservation within the same product, depending on their risk tolerance. Having a degree of flexibility should clients want to pivot their plans is a sound approach in this climate.         

From worries about inflation, prolonged low interest rates and an array of other economic factors, investors today are a bit rattled. As financial advisers, you can help folks get on a path to living the retirement lifestyle they’ve been working towards by putting their money to work for them. Whether it’s safety and stability, flexibility or the desire for growth, help investors navigate the current landscape with solutions for today’s investor by discovering more about how annuities can address a range of financial risks in retirement.

Phil Caminiti is a vice president with New York Life Insurance Co.