Episode 26: Has COVID Made “Work Optional” A New Standard?

Isaac Wright: Well, welcome back to another episode of Wright Money Tips. It’s March of 2022 and we have had our two-year anniversary of COVID. We’ve gone from locking everything down to coming to the realization that no matter what occurs, we’re going to have to live with this going forward. And on today’s program, we’re going to talk about how that’s impacted most people when it comes to their lifestyle and the transition into retirement. And we have some good statistics around this that I think you may find to be very agreeable. And if so, something that you may want to take advantage of as far as maybe looking at your day-to-day lifestyle and routines a little bit differently. But on today’s program, we have our guest of the day, Kevin Buenvenida.
Kevin is one of our advisors here at Financial Dynamics & Associates, Inc. And again, we work with many families here that are trying to transition or understand how to transition into retirement and what that picture really looks. So, I think Kevin, this is going to be a really good topic. An article came out here recently talking about the two-year anniversary of COVID. Kind of where COVID has been and how it’s impacted the retirement plans of so many.
And why don’t we start right off the bat and talk about retirement. And again, if we’re having a scenario where, people have kind of been rattled a little bit, they want to understand maybe, “Hey, listen, I don’t want to do certain things anymore.” What kind of information or what were the main things you pulled away from some of the things that we’ve read when it comes to lifestyle planning for people that are trying to transition or maybe already retired?
Kevin Buenvenida: Yeah, absolutely. Well, big picture wise, the pandemic has had a profound effect across the board. Finances in particular, have dynamically changed over the last couple of years without a doubt. And because of the pandemic, more people have, to your point, have taken a step back and considered what they’re doing day to day. And started to ask the question, “Can I retire or have my plans to retire, been altered? Can I accelerate or maybe even push back that retirement timeline?”
If we look at maybe what’s happened in 2020 and 2021, a little over 5 million we’re forced out of the workforce because of the pandemic to a certain degree. Many different reasons. But a good majority of those people who did leave the workforce were those, we’ll just put it in the older segment and decided to fully retire at that time.
You know, big picture wise, couple of dynamic factors got introduced because of the pandemic, but one was the health concern. If you are in that stage where maybe you’re working in a position that focuses more on that day-to-day engagement with people and your health maybe wasn’t great to begin with. And you were really concerned about contracting COVID or the precautions weren’t in place to protect yourself from COVID, many individuals decided, “You know what, I don’t want to take the risk anymore. Let me step away from work. I want to protect myself, protect my family first.”
Isaac Wright: I know we’re going to talk a little bit about this, but for all of you listening, I think the main thing is a lot of people at this point, vaccinated or not, have had some symptoms of COVID. Think about what I’m about to say here. If you’ve gone through that scenario, maybe you’ve gone through a scenario where you’ve had loved ones, family members may have had severe impacts related to diseases such as COVID, it’s put an impact on people that says listen, just from a health perspective, we’ll talk financial here in a minute, but just from a health perspective, is there a way for me to slow down, possibly fully retire and spend time with those folks? That has been a big paradigm shift.
And for those older baby boomers that were already looking to retire. So, if you’re listening to the program here, if you’re 55, 60 years old or older, you’re still working, I will say this, we’ve had people walk in our doors here that have had this exact conversation with us. I need to slow down. I need to really understand my numbers. So, if I do retire, I’m ready. I’m not going to be in a situation where I’ll regret that decision because I’m ready to spend more time with my family because I’ve had a significant health problem, my wife, or somebody within the family.
The change over to this, and you may fall in this category is, it’s accelerated the amount of people that feel this way. So, you know, an extra, I think it was one plus million, have retired sooner than what they were expecting. And that’s a huge part of the population if you really think about it from the perspective of those that were in this subcategory of late boomers, ready to retire.
Kevin Buenvenida: Another dynamic that’s maybe affected the entire workforce across the board is the capability to work from home. I think from a corporate culture standpoint, or maybe effecting the standpoint and the technology that we have today, it is completely possible depending on your field to still be productive, to make a living without the commute, without having to go into the office per se. And that’s opened the door for a lot of individuals who are considering retiring, phasing into retirement, maybe not going into the office, or maybe even considering scaling back the number of hours that they work, but still collecting income.
Maybe most importantly, tainted with that, and we’ll touch base about this a little later, is keeping some of those significant benefits like healthcare coverage, on the table, so that as you transition fully away from your full-time work, you have a little bit more of a transition period where it’s not a significant drop-off in income and your lifestyle may take a step forward in an improvement versus maybe what we’re seeing on the day-to-day happening with those effected by COVID.
Isaac Wright: So, you know, we’re talking about people that are looking to fully retire. You may be in this boat. We’re going to talk here in a minute about what we call work optional, which has really been the profound thing that we’ve noticed here.
If you’ve been to our website, we’ve even talked about this work optional lifestyle, because it really has built a lot of momentum. But for those of you here, regardless of which camp you fall into, what has also allowed people to consider earlier retirement is the fact that their assets have really grown, not just stock market investments, but their home values.
Again, inflation in a way, inflated the figures of how many people can retire. Granted, I know it costs more for your loaf of bread and it costs more for your gas, but again, if you have no debt and you’ve had a rise in asset prices, there is an argument to say, “Hey, maybe I can make all this work a little bit sooner.” Would you agree with that?
Kevin Buenvenida: Absolutely. And imagine that if we reframe that entire conversation piece. Maybe their financial goals were met by an unfortunate event, like the pandemic. As quickly as the market drops, and let’s assume you had your disciplined approach to investing. You stayed invested. You saw a significant recovery in growth off your retirement savings which ties to the point, really opens the door for a lot of individuals who were planning to retire in that short timeframe.
Isaac Wright: So, I think overall, let me just say this. If you’re in a position of one to fully retire, take a step this year, figure out what that looks like for you. Let’s move on though, because we’re finding a lot and this is where I want to say, most people we have found is in this camp, is the definition of retirement is what I would call, work optional. So, when you’re able to virtually work, if you can find a job that gives you that flexibility, or maybe outright, you want to start your own career, or let’s say this next journey of maybe doing something on your own, people have really started to follow their passions.
And a lot of times passions doesn’t mean they’re going to work in that same corporate job. So, what I’m trying to say for everybody is this is if you are in a position that you still maybe want to work, whether it’s financial or otherwise, the work optional definition that I find to be most impactful is this, “What is the least amount of money that you need to make to maintain your lifestyle?”
So, if you can be able to take income from other sources. If you can step back and reduce budgeting or whatever that looks like, we can help assist you with what I would say that transitional goal, maybe not fully retired, but maybe being able to do something you enjoy doing. But the least amount of money that needs to be made to be able to keep what I would call that positive impact towards your lifestyle.
So, you know, here’s the thing, is when Kevin and I are having this conversation related to fully retired or work optional. Kevin, let’s talk a little bit about what you found, because I think with the work optional front, there’s also been a few things that you’ve also found where people that want to take that leap, but they still need to keep a few things in mind. So why don’t you, maybe open the door here a little bit on what that means?
Kevin Buenvenida: So big picture wise, as dollars and cents define what your lifestyle is or maybe will be throughout retirement. So, know what you’re going to spend on month to month and the budget conversation. I know that’s a four-letter word in the financial services industry that’s going to come down to kind of keeping within your means. And as you go through the exercise of understanding where you want to spend your money and seeing if it’s realistic for you to do the whole work optional thing, is consider changes, if changes need to occur. I think that’s one area that a lot of retirees or individuals who want to retire kind of neglect, they just assume things stay status quo.
Small changes could be adjusting certain recurring expenses, maybe cutting back on a streaming service or the amount of extra spending on clothes on a month to month. Or large changes to your budget could be something as significant as downsizing a home. If the maintenance, the utility bills, or real estate taxes are just way too much on a month to month for you.
And again, we’re talking about taking a step back in income, a downsize might be appropriate or at least entertaining that idea. The other part here is, we kind of focus on and coming back to the conversation about the pandemic and related to health, is making sure that you have critical area of your financial picture covered, which is going to be your health insurance coverage.
And for individuals who decide to scale back from full-time employments and might lose healthcare and coverage pre age 65. Now have to answer, “Where am I going to get my health care coverage from?” We all know for most individuals, Medicare starts at age 65. So, what do you do before then? And you may have to entertain options like private healthcare insurance.
Whether you’re eligible for Cobra extension on your former employers’ plan. Does your spouse have coverage that you can jump onto and just evaluating how all of those dynamics put together might affect the bottom line, which is going to be that component of your budget. How much is healthcare now?
Isaac Wright: Yeah. So, I mean, those are great checklist items. Let me just put it to you this way and give you your realistic example. You know, we recently met with a couple and that couple was bringing in about a hundred thousand dollars a year. Once we did their Social Security analysis, their investment income, what we estimated for their expenses, their budget, and a few things that we do here as part of our planning process, they would basically be able to retire as long as they could bring in about $2,000 a month.
So just step back and think about this. What happens if you only needed to make two grand a month versus 10 grand a month? And that way, your definition of retirement or stepping back and maybe working part-time where you have a lot more free time to do what you really want to do all of a sudden that starts taking shape? This gentlemen could do some consulting and make that two grand a month for a whole lot less effort, a lot less stress and if all of you are looking for a place to be able to balance that work life situation, if you will.
This is the reason we created this episode because the definition of retirement two years after COVID, in my opinion, has changed pretty drastically. We’re finding a lot more people, it’s good job security for us, but we’re finding a lot more people that want to take advantage of being work optional or fully retired.
Kevin, I want to thank you for being on the program today. I mean, these are things that we talk about all day, every day, and for all of you today, if you have any questions related to your own personal affairs, feel free to reach out to us until next time. We’ll talk soon.
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Advisory services offered through J.W. Cole Advisors, Inc. (“JWCA”). Financial Dynamics & Associates, Inc. and JWCA are unaffiliated entities.