Mainebiz

V O L . X X V I I N O. I V F E B R UA R Y 2 2 , 2 0 2 1 14 W E A LT H M A N A G E M E N T / R E T I R E M E N T F O C U S F inancial advisors recommend retirement planning from day one on the job. But the pandemic, business shutdowns and soaring unemployment have raised wor- rying questions for employees – especially those in vulnerable industries such as hospitality. Some employees could no longer save for retirement through employer plans. Older workers close to retirement have less time to recover from market losses. On the other hand, the federal CARES Act and Paycheck Protection Program helped get employees back on payroll and allowed people to start saving again and to with- draw money from their retirement plans as a stopgap to strained financial situations. We asked several financial advisors for their take on the pandemic's impact on retirement planning and how to move forward without letting stress control what should be a reasoned decision-making process able to weather turbulent times. David Hanson Managing partner and financial advisor at IIS Financial Services, South Portland Mainebiz: Has the pandemic affected people's ability to plan for retirement? David Hanson: I believe that answer depends on who you spoke to and what part of the pandemic you asked this question. ere's a big difference between where we sit today and where we were 10 or 11 months ago. Early on, people were worried as many businesses were shutting down, unemployment claims increased, and the market was extremely volatile. As the government rolled out programs and the markets came back, more and more people felt optimistic about the recovery and economy. Other people who work in the tour- ism/retail and hospitality industry were impacted by COVID a lot more and have suspended their retirement contributions or put off their plans for retirement. MB: To what extent were people affected? DH: At the beginning of the pandemic, some businesses were shutting down, and employees couldn't save for retire- ment through their employer plans, with some employers suspending their 401(k) employer matches. Markets were dropping, and people wanted to make changes within their portfolios. e CARES Act and the Paycheck Protection Program helped get employ- ees back on payroll and allowed people to start saving again. is also allowed people to withdraw money from their retirement plans without penalties [based on specific criteria] if COVID impacted them or their family. I think the pandemic put everything in perspective. We had many inquiries about life insurance and people review- ing their beneficiaries on their accounts. MB: Have you seen an effect on older workers? DH: Yes, as it varied with each person's situation. Employees within a few years of retirement were concerned with job security and market volatility. ey have less time to recover from market losses; however, we emphasize still having some money invested in the market, as it should last throughout retirement while keeping up with inflation. Some employees did decide to retire early. Reasons included working from home, not feeling safe in the workplace, new technol- ogy, or updated procedures that were put in place. Others are postponing their retirement, not because of their financial situation but more for per- sonal and lifestyle reasons. ey can't travel, and enjoy their jobs more when working from home and not commut- ing. I spoke with a couple of people who said they're going to work longer because they can work from out of state, such as Florida, in the winter and still be with their spouses. MB: Is there a rule of thumb for hav- ing cash on hand for crisis situations? DH: Keep around six months of liv- ing expenses in liquid savings, but it depends on each person's situation. Factors include how safe your job is, large purchases coming up, do you have kids, debt, disability insurance, etc. If you have more savings than that, you can invest the extra money, and when the market is down, you can buy more shares at lower prices. MB: Any tips for employers to help employees? DH: We always suggest sending out a survey or speaking with employees and asking them what their financial goals and problems are. Once you know what employees are looking for, partner with a local advisor or firm and create a program that involves educa- tion and communication, making them available to your employees. Zachary Means CEO of Means Wealth Management, Bangor Mainebiz: Has the pandemic affected people's ability to plan for retirement? Zachary Means: In some industries, sure. Hospitality has been particu- larly hit hard. But the coronavirus hasn't had the impact one would have thought it would when it comes to retirement planning. e market was down substantially in 2020 but it has recovered. e federal government rescued the market with continual low rates, accommodative policy and PPP loans, which helped a lot of small businesses and kept the market afloat. For most of the clients and companies we work with, their current financial situation is strong and they have solid financial plans in place. ey've been able to adapt and make tweaks to their plans where necessary. MB: What makes a solid financial plan? ZM: A solid financial plan should help relieve stress and provide insight into what your future can look like if you do the right things financially. Having short-term, mid-term and long-term goals help align your emotions and decisions. People with no or poor plans tend to react by emotion instead of rea- son. For those who haven't started the planning process, we encourage them to do it sooner than later. e earlier you start the planning process, the more secure you will feel and more under- standing of the process you will become. MB: How are clients tweaking their plans? ZM: 2020 is a perfect example. We have people who had travel budgets but weren't traveling. at allowed them to maybe do some additional philanthropy or accelerate gifting to their children. Travel is just one example of realized savings during the pandemic that has afforded people the ability to make decisions, relative to other parts of their financial plans, which very well could help their families long-term. MB: What kind of decisions are people making? ZM: ey may be making decisions about whether they'll even contribute or not to their retirement account, about whether or nor not they're able to help their kids with college or do the philanthropic giving that they typically do. All those things are com- ponents of a financial plan that are important to people. We believe in the value of a strong financial plan and that your financial plan should dictate your investments, goals and time horizon — one should not let those things be held captive by a pullback, correction or even a pan- demic. Market pullbacks and corrections are inevitable and people should plan for them, not be surprised by them. MB: Can employees catch up on their retirement plans? ZM: Given that the market has been strong, most people shouldn't have seen a major negative impact on their retirement portfolios so they shouldn't Retirement planning the through pandemic As financial strain hits retirement plans, advisors counsel education and communication B y L a u r i e S c h r e i b e r Any time money is involved, there can be stress and anxiety. — Zachary Means Means Wealth Management I think the pandemic put everything in perspective. — David Hanson IIS Financial Services

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