Rhian Horgan, Founder and CEO, Kindur
It's hard not to panic at times during the coronavirus pandemic, confronted with daily news of lost jobs, death tolls, plummeting retirement savings, and plunging markets. Seeking perspective on how to help retirement savers, we turned to Rhian Horgan, the founder and CEO of Kindur. Kindur is an SEC-registered investment adviser that offers automated advice that aims to personalize a saver's retirement strategy; its forthcoming app for today's generation of retirees was recently released.
BenefitsPRO: What is significant to you about the CARES Act and retirement saving? What provisions do you think will prove helpful to people?
Rhian Horgan: If you are pre-retirement, the CAREs Act provides more flexibility for both early withdrawals from retirement savings as well as increased amounts you can borrow against your retirement savings.
While generally we don't encourage early withdrawals from retirement accounts, in this moment of time it's good to see more options being made available to consumers. For those considering borrowing, borrowing against your 401(k) can prove to be more cost-effective than higher cost HELOCs or credit cards.
If you are post-retirement, the CARES Act waives RMDs for 2020. This is helpful as RMD calculations are based off of 12/31/2019 account balances and, for most consumers, this means you would have been taking funds out based on a much lower account base today. And of course for many individuals, retired or not, the CARES ACT includes a $1,200 check.
Are there any provisions in CARES that might end up being pitfalls in the future, like how to pay back the larger loans that will be allowed?
Being prudent about borrowing is important today, and frankly always. Before dipping into your retirement funds, we encourage our customers to think about ways they may either be able to increase their income or reduce their spend in the near term. For example, on the income front there are a number of remote work opportunities through education platforms like Outschool or telehealth platforms like K Health. Now that many of us are working from home, discretionary expenses like travel, restaurants and entertainment are likely reduced. Many of the digital tools we are now using to remain connected with family and friends are free or have low subscription costs.
Do you think the financial industry will still need help with from additional legislation?
The SECURE Act is really promising and the start of an important dialogue about retirement income in America. The days of pensions are long gone and we need to continue to think through how we help Americans to save and prepare for a retirement which will most likely be self funded.
What are some financial tips that employers can give to employees or advisors to clients about managing their money during this volatile time?
Remain flexible. We're in a moment of significant uncertainty and, as of now, the path to recovery isn't clear. Focus on what you can control, rather than obsessing about the markets. Taxes: Be tax-aware as you withdraw from savings. Hidden retirement taxes can cost you over $61k. Fees: Review your accounts to ensure you aren't overpaying on fees. Part time income: Consider part-time income, particularly in the first 10 years, as a way to both provide a healthy mind and wallet. Social Security: When possible, defer your election. It's likely your largest retirement benefit and it grows by 8 % p.a.
How will advising and retirement saving change as a result of COVID-19? Will there be any lessons learned?
We've always believed that health and wealth were intertwined, and you are seeing this more than ever today. COVID-19 is a reminder to all of us that shocks to the system can come very quickly and upend our 'Plan A'. Having thought about a 'Plan B' (reducing spending, working part time in retirement) will help you activate a new plan when a future crisis hits.
Boomers and late boomers might be forgiven for feeling panic about whether they will be able to retire when they want to. What advice might help them?
We're encouraging boomers to be flexible about their plans. There are a lot of decisions that go into creating a secure retirement. At the foundation is a solid savings plan (and discipline about executing the plan) but don't forget how important decisions like your social security election, part time income in retirement, taxes and fees are. Excess taxes on withdrawals alone can cost retirees over $61,000 (on a 1MM nest egg) so additional retirement income can be created by tax aware withdrawals. It's tempting to focus on the markets but we encourage our customers to focus on the levers they control.
What can we tell younger people who might be less inclined to want to save for retirement, seeing what happened to older people's retirement plans?
It's even more important that younger generations have a solid savings plan. Baby boomers are the first generation in America to be retiring en masse without a pension. This will be even more true for Gen X and millennials.
What's clear from the baby boomer experience thus far is that starting saving early, being flexible around retirement date (including part time income) and being thoughtful about government benefit elections is the only recipe to self fund your retirement– whether you are a boomer, Gen X or millennial.
Do you have any advice for advisors, as an entrepreneur and financial professional yourself?
Listen to your customers. One of the challenges for the financial services industry is the siloed nature of the retirement industry– insurance, asset management, real estate, government benefits etc. What the customer, however, is asking for is holistic advice. That's why we're on a mission to re-imagine what retirement advice looks like. Our goal is to holistically answer the retirement income question for boomers and give them peace of mind that, whether they live to 80, 90 or 100, they will have income for life.
Rhian Horgan is the founder and CEO of Kindur. Kindur is an SEC-registered investment adviser dedicated to helping retirees feel prepared moving into retirement. We provide smart, automated advice to personalize your retirement strategy so you can manage your savings with confidence. Prior to becoming CEO of Kindur, Rhian worked for 17 years at JP Morgan where she advised families. She has been quoted in The New York Times, Forbes, CNBC, and the Retirement Income Journal.
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