Many seniors and retirees saw their accounts swell last year amid reduced spending, stock-market gains, and deferred required minimum distributions as the pandemic turned the world topsy-turvy.
With vaccines set to help restore a semblance of pre-Covid life, now then is a good time to consider how to redeploy unused vacation funds, reallocate assets that may have gotten out of balance, and re-engage with a changed world.
Even with pandemic precautions likely to remain in place for some time and an uncertain recovery, financial advisors and transition experts say there are a number of steps seniors can take to alleviate anxiety and mitigate risks.
Redeploying Lockdown Savings
“Most of our clients have money building up because they haven’t been able to spend it on vacations, dining out, or entertainment,” says Judy Rubin, a wealth manager at Plaza Advisory Group at Steward Partners in St. Louis. “Most have seen their investment values climb past pre-Covid levels.”
As such, she says, many investors should reallocate some profits from riskier assets. Depending on a client’s situation and risk appetite, she’s investing in value- or income-oriented stock funds, certificates of deposit for the peace of mind despite the paltry rates, or short-term bond funds and other short-term assets, she says.
“If you were a moderate investor five years ago and you haven’t rebalanced lately, chances are that now your portfolio has drifted to being much closer to moderately aggressive,” Rubin says. “You’ve got to trim from the investments that have had outsized growth and move that money to something safer if you’re going to be able to keep your portfolio in that moderate position.”
Doug Kobak, founder of Main Line Group Wealth Management in Conshohocken, Pa., is shifting some clients’ profits from technology-focused investments into holdings with a lower correlation to the broader stock market—such as long-short mutual funds, which seek to maximize the upside of markets, while limiting the downside risk. For clients with larger accounts, he says he’s investing in private equity, venture funds, and real estate.
For investors who remain skittish, Kathleen Stewart, senior wealth strategist at BNY Mellon Wealth Management in Pittsburgh, says her firm encourages clients to use dollar-cost averaging to take risks at a reasonable level rather than to try to time the market.
One way skittish investors can gain greater confidence would be to get a better handle of their overall financial picture. Stewart advises evaluating spending and saving habits in much the same way as one would evaluate asset allocation. Even small spending increases over time can diminish one’s asset goals, she says.
Relieving Travel Anxieties
Many seniors are eager to venture out and travel again but remain leery about what post-pandemic travel will entail, advisors say. A few precautions can help allay fears.
To entice bookings, travel companies from hotels to airlines now have good refund policies in place, says Julia Carlson, founder and chief executive of Financial Freedom Wealth Management Group in Newport, Ore. But travelers should check to see what’s offered—be it a full refund or a transfer if a trip needs to be canceled—and buy additional travel insurance to cover potential costs if a full refund or transfer is not available.
Many credit cards have travel insurance policies that can cover unforeseen disruptions to your travel plans, Carlson adds, but it’s important to understand what a card covers before fully relying on it. Travel cancellation/interruption, lost baggage and emergency travel assistance are common coverages cards may offer, she says.
One important coronavirus-related consideration regarding credit-card coverage. “Some credit cards cover cancellations due to coronavirus, but only if the cardholder or a travel companion are in quarantine imposed by a physician or a government authority,” says Jill Gonzalez, an analyst at WalletHub.com, a consumer-finance website. “If the cardholder chooses to cancel a trip for fear of the virus, they will not be covered by insurance.”
Rubin advises those who are making travel plans now for the next year or so to work with a reputable travel agent or company. While young travelers may be fine accepting uncertainties associated with online bookings, Rubin says many senior and luxury travelers still use travel agents to manage the complexities of “bucket list” trips, especially for travel abroad.
Advisors also recommend that skittish travelers re-evaluate their travel priorities and focus on domestic road trips or visiting family. Initially, it may be best to take an independent, more intimate tour rather than, say, embark on a cruise on which there will be many people around you, Carlson says.
Rubin adds: “People are definitely going to go to the state parks more; we’re going to see America. We’re going to be thinking twice about hopping on that plane or that cruise ship.”
Finding Your Comfort Zone
The post-pandemic world will also be altered in ways that may strain relationships and create anxiety, says Marty Martin, a Chicago-based financial psychologist who works with the Planning Center, a fee-only financial-planning firm.
There will be some awkwardness and “negotiations about what’s civil and what’s safe,” he says.
Attitudes on masks and vaccination pose perhaps the biggest challenge. Some in the younger generation may think they have to wear a mask only in the workplace to protect older workers, Martin says. Another tension point: If one person in a core group of friends decides not to get vaccinated.
If you aren’t comfortable engaging in certain activities with friends or colleagues because of uneven health precautions, don’t succumb to pressure, but phrase your refusal gently, Martin advises.
“Instead of saying, ‘No,’ say ‘I don’t feel comfortable,’ ” he says. A strong relationship should withstand that, he says.
Stewart of BNY Mellon Wealth Management says that reviewing your catastrophic insurance needs, such as health, long-term care, and property and casualty insurance, to make sure you have what you need in place can also help alleviate fears and anxieties as you re-emerge from the pandemic.
Ultimately, says Financial Freedom’s Carlson, it’s important to acknowledge and express feelings of anxiety as you re-emerge, and it’s OK to move forward despite anxiety. “You don’t have to go from zero to 100,” she says.
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