The U.S. is in a “new era” of retirement income strategies, in part because of an avalanche of temporary and permanent policy and regulatory changes, said Jamie Hopkins, managing director of Carson Coaching and director of retirement research for the Carson Group.

In additon, he noted, it's a new era because the country hasn’t experienced interest rates that have been this low for so long.

“It’s making it difficult to find income, payout and return,” said Hopkins, adding that he's concerned that it's forcing people who are near retirement to be overweight in equities.

"They’re not being drawn to the fixed-income markets because they don’t feel like the payout return is high enough, so they’re chasing return in dividend paying stocks and the equity market,” he said.

And on top of that, he remarked, Americans are not exactly flocking to annuities or insurance, either. 

There’s no telling what shape the economic recovery is going to take, Hopkins said, nor whether financial markets will continue their recovery. If anything, the data on investment behavior over the past several months paints a muddied picture.

“From the anecdotal side of things, we ran into people doing everything,” he said, noting that some people were buying during the March sell-off in equities while others were selling. "And it’s mixed on what people near retirement did. If you find you’re making big changes, it means you weren’t properly allocated going into that time period.”

Unintended Consequences
Hopkins is concerned that rule changes around early retirement account withdrawals and retirement plan loans will damage Americans’ retirement readiness.

The CARES Act allows for a $100,000 coronavirus-related distribution if someone has experienced illness, a loss of employment or other disruptions caused by the pandemic. Additionally, it allows for an expanded $100,000 loan from 401(k) accounts for people facing similar circumstances.

“The leakage issue is always a concern,” said Hopkins. “Any time we create more access to retirement accounts it becomes a larger concern because that money is being used for things other than retirement. We may see a lot of people using retirement funds for day-to-day expenses today just to get by, and in the future we’re not going to have as much saved for retirement.”

The CARES Act also allows taxes on coronavirus-related distributions to be paid over a three-year period, and extends the time in which people taking distributions can return those assets to their accounts.

Hopkins posits that the coronavirus relief packages did their job in putting more disposable income into consumers’ hands and stabilizing financial markets—at least temporarily. But at some point, the vast quantities of spending by Congress and the Federal Reserve are going to weigh on the national debt and annual payments to service that debt.

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