Retirement isn’t a one-size-fits-all experience, and nor should be retirement planning. Not only has the COVID-19 pandemic changed the calculus on how to plan for long-term healthcare costs, but individuals from various demographic backgrounds tend to have differing income needs in retirement.
Recently, I sat down with Kristi Rodriguez, SVP and head of the Nationwide Retirement Institute, and Chris Graham, CIO for Nationwide Fund Advisors, to get their take on how financial advisors have an opportunity to evolve their approach, helping ensure financial resiliency for communities who’ve traditionally been locked out of financial services.
In her role, Rodriguez leads the teams responsible for educational and advocacy efforts on behalf of a secure financial future. She oversees an extensive network of experts working to develop strategies that address the major retirement challenges faced by America’s workers, from retirement income to long-term care. Rodriguez has over 20 years of experience and has been with Nationwide since 2015.
With more than 18 years of asset management, investment banking, and wealth management experience, Graham is responsible for manager selection, asset allocation, and product management for Nationwide’s extensive family of investment funds. He joined Nationwide in 2004.
The following is a lightly edited transcript of our conversation.
Lara Crigger, managing editor, ETF Trends & ETF Database: How has the COVID-19 pandemic impacted how we define long-term financial resiliency? What new concerns have come to light, and what hasn’t changed?
Kristi Rodriguez, SVP and Head of the Nationwide Retirement Institute: We think COVID has significantly impacted how Americans are re-thinking their long-term financial resiliency, particularly regarding long-term care and healthcare.
We released a “COVID PULSE SURVEY” last year, in which we found that Americans across generations are re-evaluating their own healthcare and long-term care. This is interesting because historically, these concerns are more elevated in the Baby Boomer generation. But we saw tremendous response from Millennials and Gen Xers, who’ve experienced social isolation and impacts on their physical health from COVID. 52% of Millennials and 57% of Gen Xers say they’ve been impacted by COVID, either being “sandwiched” in caring for loved ones or through impacts to their own health.
Another important nuance across generations is the realization of a need to have that long-term care discussion in the first place. In previous years, we’d survey Millennials and Gen Xers, and there would be a lack of awareness around financial planning for long-term care and how to calculate the costs.
So this survey helped us understand that Americans are really feeling a lack of control and needing much more guidance around what this means for their current and future state. They also want guidance on how not to be blindsided by the future. How can they plan and prepare?
As for what’s still the same, healthcare is still the same. Across the generations — Millennials, Gen Xers, Baby Boomers — our survey shows that without a doubt, everyone wants to be healthy in retirement, but nobody is prioritizing preventative measures. To some degree, they’re doing things that we would not recommend, like not going to their benefit plan fairs, or cutting their prescription pills in half, and so on. So again, that’s a great opportunity to think about how we as planners can have a dialogue around guidance and support to help them prepare their financial state now, as well as for when they move into the future.
Chris Graham, CIO, Nationwide Fund Advisors: I think long-term financial resiliency in retirement is what most of us want to achieve. And COVID has certainly impacted that. With financial resiliency, we’re trying to attain a type of lifestyle. That can be hobbies, travel, social lives. But there are also unknowable things. The unplanned events that come up. Healthcare is a big one. But what if you have kids and grandkids? You’ll want to participate in their lives. So one thing that hasn’t changed is the financial wealth that you have to build to help you fund this resiliency into retirement.
In terms of what has changed, I think healthcare is a big one. With COVID, we’re seeing long hauler effects, all sorts of impacts from COVID that may make retirement more costly than it was before.
On the financial side, well, before COVID, the 10-Year [Treasury] interest rate was just below 2%. At the depth of the pandemic, we went to 0.5%. We have now recovered to about 1.3%, but when we think about how to accumulate assets over time, well, that’s more difficult to do with rates as low as they are.
COVID has also changed the way the economy works. How do you build wealth going forward? The opportunities may look a little bit different going forward than they did before. I think we’re starting to embrace that as much as we can, before we can return to normal. But we’re also coming to a sense that “normal” may be a little different than what it used to be.
Crigger: Chris, you said something very interesting just there: The economy has changed due to COVID. Is that change temporary? Or have things fundamentally altered?
Graham: I think the change has been happening over some time. What these extreme events do, whether it’s COVID or the financial crisis of 2008 or something else, is that they bring about change a little faster.
In many parts of the world and entire communities, the jobs just disappeared. People are trying to find out what they’re going to do next. Many of these changes are making people rethink their stability going forward. Luckily, in the U.S., we’ve got a little time to absorb it and develop a new game plan.
But many of these impacts — whether it’s tech-driven or generationally driven for healthcare — I think there will be things on the margins that will be different going forward. We see this manifesting itself in commercial real estate. Many buildings are empty, and it’s not clear when they’ll ever be filled again. That has led to new services — your DoorDashes and UberEats, and so on. There are these new opportunities.
So it really comes down to flexibility and having a plan, then having the resources to implement that plan. This is where you start to see a social divide, and that’s where I think some of the economics play in. But these impacts will be with us for some time.
Crigger: As individualized as retirements can be — everyone has their own vision for retirement — planning for retirement often follows a very one-size-fits-all trajectory. Advisors assume clients should have a certain asset base to retire or that they’ll require a certain withdrawal rate of 4% or so on. And it all looks the same. But different communities have differing long-term financial planning needs. What does financial resilience and retirement look like for historically marginalized communities and communities of color?
Graham: Financial resiliency is the common thread. No matter what community we come from, we’re all looking for the same thing. But the tougher piece is, how can we help marginalized communities achieve financial resiliency?
For me, I think it starts with exposure to education, and that leads to opportunities. If we think about the life cycle of a person, when you’re younger, you get the education and get exposure to opportunities. Maybe you get an internship — and that maybe turns into full-time employment, which turns into the real wealth of asset accumulation. Good jobs over time leads to wealth creation, and if you can help create wealth over a long period of time, that turns into something really big, which I call generational wealth.
For many people in many communities, you can have a nice income, and that income can allow you to live a really good life day to day. But really good income over generations turns into generational wealth, leading to that financial resiliency over a long time. Those are the pieces that we’re ultimately trying to get to.
But living in America, we have a lot of privilege, just by being in the United States of America. So the question is, how can we spread that privilege to all communities? That’s the task that Nationwide has, that financial advisors have. We’re still working on figuring it out.
Rodriguez: I think a powerful point Chris just made is this: Income and wealth are not the same. Income is what you make and live on. But wealth is transferable. It’s a legacy you leave behind. So how do we start to have these conversations about generational wealth? And how can generational wealth uplift the entire community, as well as the country?
When I think about the recent social injustice incidents happening across the country, the economic impact is the silent one we don’t talk about, yet it’s probably the most powerful. So there’s a need and an opportunity for us to help individuals understand how they prepare for retirement and build generational wealth.
I have a couple of stats to share. So, in the Nationwide Retirement Institute, we’ve looked closely at diverse markets on behalf of NF. We started back in 2017 by looking at the nuances that impacted women as they built wealth and planned for retirement. Recently, we’ve kicked off some proprietary research around Black Americans as well. In future years, we’ll focus on Latinx, LGBTQ+, and Asian Americans.
But we prioritized research around the Black community first because it’s clear, looking at the U.S. census population data, that by the year 2045, the country will be browner and grayer. So we need to make sure we’re meeting the needs of those individuals and communities who have been left out of the system. That’s significant. But in 2020, the Federal Reserve found that for the 44% of Black Americans who actually had retirement accounts, their [average] balance was only around $20,000. That stat gives me goosebumps. All it takes is just one major health event not covered by insurance to wipe out their entire retirement savings.
We also found unique nuances specific to Black caregivers: Black caregivers assist their loved ones with long-term care for eight hours per week, more than the national average. Yet on the flip side, fewer than 10% had a financial plan in place. They feel challenged in doing that because they can’t take a day off work. Also, the Black community was significantly impacted by COVID, so what financial impact does that have, too?
What was promising in the study was that, even though fewer than 10% had a financial plan to support their loved ones through long-term care, more than 50% said they wanted to prioritize this due to COVID. At Nationwide, we believe this is an opportunity for different financial solutions and products to emerge that can really help these conversations advance.
Crigger: You’ve mentioned the need for greater financial education. But without access to that education, it won’t do much good. How can we improve access to financial services for communities that’ve traditionally been locked out of them?
Rodriguez: It’s an interesting question, and there’s no short-term or one-response answer. We have to get to the root cause of why. Part of our responsibility as financial professionals is to create an environment of empathy. When a community is underserved, it’s not always about them not having the assets to invest. It’s just that they’ve traditionally been marginalized. So once a financial professional sees through that lens and understands our country’s demographics are changing, how do they build empathy and trust? How can they serve that client in ways that make sense? I think that will come with taking the time to really understand the communities who will benefit from having them.
Crigger: You mentioned that there were solutions that Nationwide has developed to help retirement savers meet their evolving income needs in retirement. Could you elaborate on that?
Graham: From a high level at Nationwide, we have retirement plan products; we have annuities; we have mutual funds; we have ETFs. We’ve designed some of these ETF products lately that offer protection on the downside of the markets. The markets have started to get a little bit “rich,” and sometimes investors feel uncomfortable going into markets that seem too high.
Rodriguez: We also have a lot of tools to help retirement savers plan for their evolving income needs. You can not only leverage them through your financial professional, but also access them directly on our site. A few include:
- My Interactive Retirement Planner℠, where retirement savers can create hypothetical retirement goals, put them into their accounts, and think about what their retirement savings, pension, and Social Security income looks like when put all together. I love this tool because it’s intuitive: You get a red, yellow, or green to let you know if you are or aren’t on track.
- My Medicare Matters® tool. Healthcare is the second largest cost outside of housing for those in retirement. So this tool, which we co-branded with the National Council on Aging, allows our clients to make confident choices about their Medicare coverage. It provides personalized education and decision support and allows them to estimate what their real Medicare-related costs will be.
- The Health Care Costs In Retirement Estimator and Long-Term Care Costs Estimator, which allow individuals to use a framework for possible solutions when planning out their healthcare and long-term care costs. That can be used by an individual or their caregiver looking to estimate the cost of care.
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