The pandemic is leading more future retirees to a financial awakening

No one could have predicted the impact Zoom would make on retirement planning and wealth and estate management prior to the coronavirus pandemic.

In-person meetings and conversations – the long held gold standard for financial advising were dramatically curtailed because of the COVID-19. For many people the pandemic has driven closer scrutiny of long-term financial plans; making, changing or holding investment strategies and navigating stock market spikes and dips. It’s also triggered action for updating important personal documents – like wills, trusts or assigning minor children guardianships, have taken on greater urgency.

“The take away from this year and the real change is the way we connect with our clients and execute business continuity plans,” said Laurie Peer, president of RKL Wealth Management with offices in Spring Township, Berks County and Manheim Township, Lancaster County.

Peer said virtual platforms had been especially crucial this year. They are here to stay as a method to “broaden the way our industry will find new clients, and how clients will find us,” she said.

Solid, flexible business continuity plans for firms like RKL “were really put to the test this year” to ensure technology and security was in place from March 18 onward. That’s when many businesses were restricted from working in person, forcing work-from-home setups and creating new challenges for professionals and clients.

“Once firms became confident this could be done successfully, it helped us move forward,” Peer said.

Paying attention

With the pandemic creating more time in many peoples’ lives along with more free time at home people seem to be paying more attention to financial planning, said Joyce Petrenchak, senior vice president and wealth strategy regional manager for PNC Bank’s northeast region. She is based in Blue Bell, Montgomery County.

“Now [clients] are more focused on what their plan looks like and the things they can do to improve it if it’s not where they want to be,” she said.

She agreed the pandemic created a virtual component that did not exist prior to coronavirus. “One thing that has changed is that we are primarily virtual. We’ve always had a virtual component, but now it has been different for people,” Petrenchak said.

Showing clients the investment tools they currently have underscored how the impact of their decisions can be predicted over the coming 10 or 20 years.

Go long term

Paul Marrella a wealth manager at Marrella Financial Group LLC in Wyomissing, Berks County, said this year’s market performance has made the best case for long-term planning he’s ever seen.

“If you’ve never believed markets are unpredictable and economies can be resilient I think this is news that can’t be ignored,” Marrella said of the record highs and seismic lows of surging stock markets around the world during 2020.

Investors who keep their eyes on the ultimate prize – comfortably funding retirement and their golden years “fared OK this year,” he said. “Those who were myopic did not.”

The bottom line is that the pandemic has not changed the value of understanding how much money will be needed to fund retirement and taking appropriate steps to achieve that goal.

“The biggest mistake people make is they look at the rate of return as their benchmark for success [as in] the more I earn, the better off I’ll be. That is true with one exception – when I try to earn more, I also risk losing more,” Marrella said.

Reacting to market swings – and panicking because of those changes may spur some investors to react emotionally, rather than from what is in their long-term best interests, Marrella said.

Running the numbers, knowing how much is being spent and making decisions with that information should inform the timing of retirement. These are important decisions in moving forward to the next life stage.

He recommends viewing long-term financial planning as a math problem.

“From Day 1 of retirement to me or my spouse’s final day, how much money do I need in my bank account to do the stuff I want to do,” Marrella said.

Treating retirement funding this way can help calm fears and provide a measure of control – even when stocks may seem out of control. Padding the amount of money needed to fund retirement, adding the anticipated cost of inflation and health care can go a long way toward taking the

reflexive emotional jolt out of a poor performing quarter.

He recommends spending less than you earn, being debt free and living within your means as a route to success, capped with a philosophy of “discipline, discipline, discipline.”

“I think it helps people psychologically to think about this, that every dollar has a job description,” Marrella said.

The end game

Preparing for the end of life isn’t a conversation most people are happy to have, but Petrenchak said the pandemic is starting to crack open that resistant taboo. “For a lot of our clients [the coronavirus pandemic] has brought about thoughts of their own mortality,” she said.

The result has been that financial health and well being and wealth and estate planning have become higher priorities.

Petrenchak said helping clients update documents including financial and health care powers of attorney was another by-product of the pandemic’s uncertainty, and urgency this year.

“I think the scarier conversation is what will happen if you don’t have open discussions about estate planning,” Petrenchak said.

Along with wills and estates, Petrenchak advises regularly reviewing and keeping beneficiaries updated on 401K plans and life insurance documents.

Triggers for reviewing a will should include changes in circumstance such as the birth of a child or grandchild, or the death or divorce from a spouse or partner.