Baby boomers weigh early retirement amid COVID-19 – here’s how advisors can help

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Denise Gallant, a veteran certified financial planner with Applied Wealth Strategies in Sydney, N.S., is finally visiting her three-year-old granddaughter in Edmonton for the first time since the COVID-19 pandemic began. No glitchy Zoom call required.

If the past 20 fraught months have taught her anything, it’s that spending time with family should never be taken for granted. Life’s too short.

Many of her clients who are close to retirement are feeling the same way, she says. After months of uncertainty, some are re-evaluating their priorities and taking the plunge to leave work earlier than planned. The pandemic, and its emotional fallout, has been a catalyst to spark “the Great Resignation.”

“Oh yes, we’re seeing this,” Ms. Gallant says. “In a perfect world, people would retire when they are financially ready, but the decision to stop work is often about many other things. Financial security is not always the priority.”

A recent survey from the Canadian Institute of Actuaries shows the pandemic has altered how non-retirees are planning for their golden years fundamentally. It’s not always a pretty picture, though. Eight per cent of survey participants planned to retire early due to pandemic-related health and safety concerns, while another 7 per cent would retire sooner because they already lost a job or were laid off.

Meanwhile, some call it quits after months of feeling overworked as companies struggle with labour shortages. Others have made a small fortune as the stock markets rebounded quickly after the initial plunge last year.

Then, there are spending habits and cash flow.

“A lot of people have realized during the pandemic that they can live off less,” says Satinder Dhinsa, a certified financial planner and financial security advisor with Canada Life Assurance Co. in Toronto. “They’re saying, ‘You know what? I don’t need to travel as much.’”

Dealing with an ‘abrupt change of heart’

Whatever reason clients give for checking out of their careers early, these sudden decisions have an impact on advisors.

Ms. Gallant says she’s seen an increase in new clients who have given notice and then arrive at the office for the first time, clutching their retirement package.

“They expect a [financial] planner to put it together, give them a second opinion and reassure them that they’re OK,” she says. “They only approach a [financial] planner near the very end.”

Ms. Dhinsa says she’s also seeing more shell-shocked clients, asking if they should take their Canadian Pensions Plans early or dip into their registered retirement savings plans instead.

Every client’s situation is different, she says. Then there are those who, suddenly feeling mortal in the face of a worldwide pandemic, are interested in discussing life insurance after dragging their heels.

All of these hasty changes definitely ramp up the paperwork and office hours, which is made all the more challenging when working remotely.

“When you’re in the office, it’s so different because your assistant or specialist is right beside you,” she says. Rather than turning around and asking for help or input, e-mails and phone calls slow the whole process down. “It’s taking longer to execute things.”

But, Ms. Gallant doesn’t see her long-term clients’ abrupt changes of heart about their retirement as a curveball. It’s an adjustment. Chances are she already knew about their pension details or their plans to downsize homes someday. The timeline has simply moved up. Nor does she worry much about short-term inflation increases.

“Certainly, inflation is going to be significant in 2022, and it’s going to give people some horrors, but financial planners plan for 3 per cent inflation anyway – and we’ve been running under 2 per cent for a long time,” she says.

Having ‘tough’ conversations with clients

Mary Liu, a financial planner with Kawartha Credit Union in Perry Sound, Ont., says she’s having deeper conversations with clients these days about their worries when it comes to retirement.

“Sometimes, I feel like I’m also their therapist. I’m not qualified, but I’m happy to listen,” she says.

To keep clients from feeling overwhelmed, particularly if they’ve been blindsided by career changes, she discusses retirement by breaking it down into three stages: early, mid, and late retirement. By focusing on smaller bites, clients walk away with a clearer, more digestible vision of when certain life events might happen, whether that’s selling the cottage or buying into a retirement community.

Meanwhile, volatility in the stock market and a shorter timeline for retirement means Ms. Dhinsa has had to have some tough conversations lately. Before the pandemic, she calculated an average annual rate of growth of 4 or 5 per cent into her projections. Not exactly aggressive or unrealistic. But now she says she’s being even more cautious and lowering the presumed growth rate even more.

“I’m trying to be a bit more realistic and tell them, ‘Listen, you might have a shortfall, right? Let’s do something about that,’” she says.

However, not all clients want to get a jumpstart on their retirement. For some, more than a year of being at home has given them a clearer view of what retirement might be like, and not all might think it’s that great.

In addition, Ms. Gallant says she also has plenty of clients working from home who are happier now than ever. They’re exercising more, being more productive at work, and the house is clean. The extra money saved from commuting and other costs isn’t bad either.

The upside is these clients are happily working past their projected retirement date.

“They’re saying, ‘Wow, I’m saving and I’m feeling a lot more financially secure than I ever have,’” she says. “They’re going to ride it out.”