While discussions of climate change have centered on its environmental, social and investment impact, far less attention has been paid to how climate change impacts your clients’ retirement and how you can prepare them for this looming challenge.

Six Ways Climate Change May Disrupt Retirement

Climate change has the potential to affect nearly every aspect of a client’s retirement experience. We list the top ways.

1. Retirement Location—The choice of where to retire must consider how climate change could play out in that location. For example, a low-lying coastal area that may be subject to rising sea levels and extreme weather events. Homes near the beach aren’t the only areas that may be adversely impacted; certain inland parts of the United States may be equally prone to severe weather events, as well as extreme droughts.A location disproportionately affected by climate change may have financial consequences, including loss in home value as people move away, the possibility of having to move many years into retirement, higher insurance costs and the risk of financial loss from damages that insurance won’t cover.

2. Costs of Essentials—Climate change may accelerate the cost of essentials. For instance, food prices may increase as drier, hotter seasons disrupt certain agricultural regions, while water and electricity costs may rise as utilities increase spending to accommodate a new energy or water distribution model.
3. Higher Cash Needs—More extreme weather may raise property damage costs, which—along with higher spending on essentials—may require retirees to establish higher cash levels to meet emergency spending and increased living costs.
4. Health Considerations—The choice of retirement location could affect a retiree’s personal health and potentially increase medical expenses. From increasing wildfires in the West to extreme heat in the southern portions of the country, breathing smoke or enduring heat-related stressors will affect an individual’s health and lead to higher health care spending.
5. Higher Taxes—The tax drag on retirement income may get worse, as all levels of government raise taxes, including property taxes, to fund spending to combat the impact of climate change.
6. Investments—Last, but not least, is the risk to portfolios. Clients will need to be sensitive to the long-term prospects for traditional investments in the face of mounting climate change challenges. It’s an important subject that we explored in The Impact of Climate Change on Investment Portfolios.

Discussing the potential impact of climate change on retirement with your clients is a conversation they will appreciate, and one that will reinforce the value of working with you. It may even prove to be the competitive differentiator that helps you win new clients!

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