Planning for the Unexpected

Your plan participant has worked with their company for over 30 years. She’s been diligent about saving, putting away 10 percent annually, getting a healthy employer match, and making retirement saving a priority.

Yet here she is at age 57, staring at an uncertain future. Her parents are still alive, yet ailing and needing expensive medical care. Her children, saddled with huge college loan debt, need her help to make rent. The saving she did is in jeopardy as she contemplates withdrawing from her retirement accounts to meet her new obligations.

That’s the scenario far too many plan participants are facing these days. A painful recession, family illness, adult children needing financial support, even a forced early retirement could have devastating effects on the retirement savings of many veteran workers.

When participants are putting together their retirement saving strategies, that’s when advisors can improve their results by getting them to focus on the unexpected events that don’t often factor into a retirement plan, but can certainly impact retirement significantly.

Here are a few ways to shift the thinking of your plan participants:

Measure current spending. Typically, current spending doesn’t include the extras – child care, college costs, parent care, chronic illness. Instead of focusing on the monthly bills such as mortgage, credit card debt, personal loans, and auto loans, get your plan participants thinking about the other expenses, including financial assistance for children or chronic illness of a spouse or parent.

Shore up in case of emergency. While children may not need financial assistance forever, plan participants are wise to consider that children may need help for a longer period of time. Also, parents may be health now, but what chronic illnesses or diseases are present in the family history that could be a financial strain later on? Likewise, participants should build a plan that could withstand the impact of an early retirement or company closing.

Expect increased costs. Healthcare costs, taxes, auto and home prices, interest rates should all be viewed from a futuristic perspective. That healthy 4% auto loan rate today could well be 12% in the next decade. Show your participants how those increased costs can chew into a retirement fund.

Planning for forced retirement. Layoffs and company bankruptcies are very much a threat to a healthy retirement. And while many veteran workers would think they’ll find another job until retirement, that’s not always possible, particularly if the worker lives in an area where jobs are in short supply. And while it is against the law to discriminate based on age, older workers do have a tough time securing work after losing a job. How will an earlier retirement affect the plan participant’s retirement portfolio?

Life doesn’t come with a script. Even with the most diligent planning, outside factors and family obligations can put a strain on your plan participant’s retirement security. By helping them recognize a potential need and get an emergency fund in place, you can help your plan participant save for the unexpected, which may mean a more comfortable retirement outcome.