Workers determined to retire during market turmoil may turn to alternative income sources
While some defined contribution pension plan members may push their retirement plans back because of market turmoil caused by the coronavirus, others won’t be willing to do so.
Those soon-to-be retirees will have to take other measures to ensure they can retire, which will likely include diversifying their potential sources of retirement income, according to a new report by data analytics and consulting firm GlobalData.
“With the value of pensions being especially vulnerable to volatility in capital markets, pension holders in these age groups may now have to push back their retirement plans to offset the losses that have occurred due to COVID-19,” said Daniel Pearce, senior insurance analyst at GlobalData, in a press release.
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“However, other individuals in these age groups may not be willing to continue working and, as a result, look towards other assets as means to fund their retirement, such as income from rental property or equity release on mortgages.”
Both rental income and mortgage equity are relatively insulated from market volatility, contributing to their potential popularity, noted the report. “The insurance industry should prepare for individuals to look for a more diverse portfolio of assets to fund retirements,” said Pearce. “If the impact of COVID-19 on capital markets lingers for years to come and dampens returns, then the shift to diversification may become ingrained into retirement planning and spur others outside of these age groups to give their retirement funding plans greater attention.”
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