Remember the lockdown? It was a glimpse into retirement - and workers need a reminder

In the Spring of 2020, the world changed. COVID-19 sent us into pandemic lockdown. We were unable to leave our houses for a few weeks. Your employees want to forget those dark days. As a manager or business owner, you feel the same way. Regardless of how we feel, let us shine light into that corner of the calendar again. The pandemic lockdown might be a window into retirement if your employees don’t prepare in advance.

Being stuck at home

Remember when you were not allowed to leave the house/?

Pandemic: During the pandemic, we went through a few weeks when people were told not to leave their houses. You did not go into the office. Schools were closed. You were discouraged from grocery shopping. You only had the four walls to look at.

Retirement: If employees do not save towards having an asset base to generate income in retirement, they might be stuck indoors at home because they cannot afford to go anywhere. Everything they would want to do will cost money. That’s money they don’t have, because they are living on a fixed income, primarily Social Security.

Plan Now: Pick a time of year to kick off a retirement planning awareness campaign. Does your company offer financial planning and retirement planning training and consultation?  If so, tell your employees. Can they be referred to an outside provider who will offer complimentary or low-cost counseling?  If the answer is yes, get that news out there too. Emphasize the confidential aspect of the available counseling.

Rapid increases in prices

Our buying patterns changed during the pandemic. People decided to remodel their homes and landscape their gardens. The price of building materials like lumber shot up.

Pandemic: People stuck at home needed to occupy themselves. The price of exercise equipment rose as people bought dumbbells. People bought exercise bikes with subscription exercise programs. Building materials became much more expensive.

Retirement: The main problem of living on a fixed income is obvious because of the word “fixed.”  Even if Social Security is indexed for inflation, the cost rises in employees’ household budget are often much higher than the official inflation figures. Unless employees have some retirement investments providing growth, they will not be able to afford the things they want to do.

Plan now: Many employees might think prices will stay frozen at the level they were on the day they retired. Does your firm offer online tools that can take a lifestyle level, expressed in dollars, and project future costs?  If so, schedule a session to roll it out and demonstrate how it works. This can be an online tutorial.   Employees should also get proper advice and try to have a growth component within their retirement account at the company.

No travel, domestic or foreign

Business travel evaporated during the pandemic. Airlines cut back their schedules. Airfares went up.

Pandemic: Many countries closed their borders during the COVID crisis. Others required testing immediately before flying overseas. This because expensive. Vacation travel plummeted during the pandemic.

Retirement: If employees do not save for their retirement, they won’t be able to travel for one simple reason: They will not be able to afford to do so. Even as overseas airfares have come down, if they do not have discretionary income left after paying their overhead expenses, they are not going anywhere.

Plan now: This is another financial planning issue. Your employees need to determine what they would like their retirement to look like and what the cost will be. How long are they likely to live?  How much do they need to have saved?  They might not know where to start. They might assume retirement is like continuing to get a paycheck without needing to go to work. They can spend all that extra time traveling. This is an area where face-to-face personalized advice has great value. Employers, does your benefits provider offer referrals to a financial advisor or financial planner who can help them?  Are there costs or does the firm pay for an initial consultation?

No dining out

During the pandemic, restaurants were closed, then reopened with social distancing restrictions. Everyone ate at home for a while.

Pandemic: Baking took off as a hobby when restaurants were closed. When they reopened, capacity restraints came into effect. People sat out in wooden outdoor shelters erected in parking spaces on city streets. Some of that outdoor space survives today.

Retirement: Employees might take up baking and home entertaining, if they cannot afford to eat out. Restaurant prices have been creeping up, even though inflation has slowed. Unless they have a disposable income, they cannot afford to eat out.

Plan now: Employees need to have an accurate picture of how much income they will have in retirement from all sources. This could be a lesson taught on a general level, highlighting the different income sources like Social Security and retirement plan income. Can you bring in a professor from a local college to conduct a class?  Does your benefits plan provider have someone on their staff who can fill this role? Employees need to review their current retirement savings behavior up to their retirement date. How much will they have saved?  What will their retirement income, including Social Security, look like?  How much will be disposable income?

No contact with friends and family

In the early days of the pandemic, the authorities were concerned with how the virus spread. There was a lot we did not know. Social distancing started with not visiting with anyone.

Pandemic: People were not allowed to leave the house and visit other people at their homes. This disrupted major holidays. As the rules were relaxed, people would draw chalk lines on their driveway and one couple would sit six feet apart from another couple.

Retirement: It costs money to have fun. Friends want to go out for lunch or drinks. Employees might not be able to afford to pay their share. Their friends will “carry them” for a while, but they will feel it is not fair. They will stop accepting invitations. Friends will assume they are a recluse and stop inviting them.

Plan now: Employees need a realistic estimate of what a comfortable retirement lifestyle will cost them. They need to prepare. There have been many articles published on this topic. Some research projects your retirement lifestyle expense fits within a range of 54% to 87%. A good estimate might be 70% of pre-retirement income.

Related: How long will you live? Poor ‘longevity literacy’ will hinder retirement savings

Many people think of retirement as something in the distant future. They figure they can prepare and catch up later. No one expected the COVID pandemic to arrive quickly, but it did.

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” is available on Amazon.