For example, several advisors report that physician clients are committed to staying on the job and riding out the epidemic, but they may well reassess their careers after that. Given the upswing in social unrest, some policemen could well be kindred spirits.

Connell says it’s a big risk for people to follow the impulse to take early retirement—or even to quit a job now and wait for the economy to recover in a few years. She cites a recent McKinsey study that projects nine out of 10 jobs emerging for displaced workers after the current recession will pay less than jobs that have been eliminated.

Small business owners and employees, nearly half of all American workers, are particularly vulnerable. A comeback for many small companies could be protracted.

People over age 50 are likely recalling February’s 3.7% unemployment rate and thinking it’s realistic to switch careers after taking a sabbatical, but they might be in for a rude surprise. “I’d be particularly concerned when it’s someone’s career,” Connell says. “They might not get a second chance. Or they might be unemployed for a lot longer [than they think].”

Advisors and their clients must deal with the variables they can control, the “known knowns,” and what post-pandemic America will look like isn’t one of them. What is fairly certain, if the Federal Reserve is to be believed, is that interest rates will remain extremely low for the next two years. Some bond market professionals argue a “lower for longer” interest rate regime could remain in place for five or even 10 years.

The implications for older Americans—and particularly recent retirees—of persistently low rates could be profound, according to David Blanchett, head of retirement research at Morningstar. Many financial plans, he says, are not structured to address this problem.

Virtually all financial assets are priced off of interest rates. The lower short-term Treasury notes are, the more anemic other asset classes are likely to be. How many advisors, Blanchett asks, want to be reaching for yield with long-duration bonds?

Some advisors like Janet Briaud in College Station, Texas, have delivered equity-like returns for clients with these securities, thanks more to capital appreciation than interest income. But unless long-term rates go negative, those days appear to be ending.

“Bonds are still super safe, but after you tack on inflation, fees and taxes, there is no way you’ll have a positive real return,” Blanchett argues.

The results in Europe and Japan, where people save more and enjoy a stronger social safety net, are not encouraging. The obstinacy of near-zero interest rates also makes a powerful statement about how soft the global economy is. At the peak of America’s longest recovery in 2018, markets became unsteady in 2018’s fourth quarter after the Fed raised the discount rate to a modest 2.5%.

Jamie Hopkins, head of retirement planning at Carson Group in Omaha, Neb., notes that his firm, which has 34,000 clients, is seeing an uptick in inquiries about claiming Social Security. On a national level, May statistics show there was an increase in claims, he adds. But it’s too early to say whether another wave of 62-year-olds are taking the benefit the way they did in 2008 and 2009.

The yields on bonds, TIPS and annuities are all being challenged by low interest rates, but these market conditions also have propelled equity prices to levels many fear are excessive. This creates the potential for sequence-of-returns risk for newly minted retirees.

Academics like Wharton School professor Jeremy Siegel have argued for the last year that, in light of the unprecedented paltry yields in the fixed-income market, a 75%-25% portfolio may be the new alternative to the traditional 60% equities-40% bonds allocation favored for decades by advisors, pension funds and other investors. The strategy has merit, but clients who embrace it need to understand the risks.

All of which makes the default option of working longer that much safer for many Americans.    

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