There have always been tried and true methods that would guide people to the promised land of retirement, even through turbulent times. 

Nowadays, in an America that’s on shaky ground, those old approaches won’t necessarily offer the results enjoyed by the retirees of yesteryear.

For instance – and as will be discussed in this blog – the traditionally suggested 4% method is becoming increasingly irrelevant. 

Moreover, COVID-19 has made it harder for Americans who are trying to save for their future.

What can be done by retirement Advisors to help clients save despite this growing problem? 

Below, this blog will explore this issue in-depth: 

Why Won’t the 4% Rule Work Anymore? 

An article from Marketwatch defines the 4% rule as follows:

Clients must keep their money in stocks and bonds and withdraw 4% (or less) of their portfolio in the first year of retirement. Afterward, they simply raise the withdrawals in line with inflation. 

Note that the 4% approach generally assumes a typical ‘balanced portfolio’ of 60% stocks and 40% bonds.

It was once believed that clients had a 95% chance to make their portfolio last for 30 years by sticking to the 4% rule.

The same article explains that today’s low-yield bonds can’t match the past generations’ results where bonds yielded much higher results.

For this reason – and many others – around 50% of Americans claim they don’t have enough money to keep up their current living standard when it’s time to retire.

And this same group of Americans doesn’t have retirement accounts. Plus, they’re relying on social security for half of their eventual retirement income.

Can the Government Help Curb the Retirement Crisis? 

During President Biden’s campaign, he made big promises about social security benefits. 

And – for the sake of low-wage workers – the Biden Administration promised to cut into tax advantages offered to upper-middle-class Americans

Unfortunately, with the congress split, don’t expect anything related to those bills to gain traction. While there’s a chance that Biden might expand upon the SECURE act from 2019 – and there would be retirement benefits – it’ll only be a band-aid solution.

What Other Retirement Problems Face Americans? 

As highlighted by Forbes, COVID-19 also led to the development of the CARES Act. 

This act knocked down roadblocks for people to withdraw $1,000,000 from their 401(k) or IRA if they were financially affected by the pandemic. 

Unfortunately, when people did take advantage of this COVID-influenced allowance, the average withdrawal was 55% of their balance. 25% of Americans tapping into their savings took out 100% of their accumulated savings. 

According to the previously mentioned Forbes article, people making these withdrawals were often around 42-years-old earning a hair over $61,000. It was then calculated that this hypothetical person would miss out on $35,000 in retirement savings.  

Some people mentioned above might have also lost their jobs and lost a few months of salary while looking for a new job, thus causing more long-term financial challenges. 

How Can Retirement Advisors Adapt to the Changes?

Financial Advisors focused on retirement planning have a looming crisis on their hands

And navigating those challenges requires one clear solution: hiring the top-performing talent who can find opportunities to grow portfolios by staying on top of marketplace trends and behaviors. 

Therefore, working with top recruiters will define whether you can handle the current rocky state of the retirement space. 

Preston & Company is a top recruiter throughout the financial industry, with a distinctive focus on the retirement space. 

By contacting us today, you’ll have access to high-level retirement talent that helps navigate your organization through whatever the future may hold.

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