How to approach retirement planning amid COVID-19

Douglas Boneparth, Bone Fide Wealth President, joined Yahoo Finance's Jen Rogers, Myles Udland, Dan Roberts, and Melody Hahm to discuss the best approach to retirement planning during the coronavirus pandemic.

Video Transcript

All right, welcome back to Yahoo Finance. I'm Myles Udland here in New York. It's time for Retirement Ready, brought to you by Fidelity. Today, we are joined by Douglas Boneparth. He is the President of Bona Fide Wealth. So Doug, let's just start from a high level here, thinking about retirees potential-- aspiring retirees, you know, millennials who are now looking at 30, 35 more years. I think what happened in the last few months was shocking to say the least. I would imagine you got a lot of incoming on what should I do, should I be changing things. Has the last couple of weeks changed those kinds of conversations? Are your clients, that you're hearing from, feeling any calmer given everything that's happened?

DOUGLAS BONEPARTH: Sure. The last few weeks definitely have been calmer weeks. In the very beginning there in March, it was very chaotic as we all know. So a lot more questions around what, you know, what's this going to mean for my retirement, and how that's come down given we've been on the rise. But the biggest point I can drive home here was encouraging people or at least letting people know who were super nervous that it is OK if you had to pause retirement savings given the amount of uncertainty that's out there. That was kind of one critical message. I didn't want anyone feeling like they were doing something really wrong if they really needed a little bit more cushion.

MYLES UDLAND: And then I guess just thinking also about cash levels and reserve and some things that, you know, millennials have been hard pressed to accumulate. Do you think that this experience is going to change people's default assumptions about what they need to have on hand? And also, I mean, I think we've talked about this before. Like millennials were already probably too cautious in their allocation. They probably wanted to have too much fixed income relative to a 40 year working career. Do you think it's going to be more challenging to get people to the risk level that all the literature would say they need to be at if they want to retire at 65 or 70?

DOUGLAS BONEPARTH: Yeah, I think we did talk about this. And I separate it really into two things, asset allocation, and how conservative you are in your mix of bonds and stocks, to how conservative you are with your cash, and meaning are you putting that cash into those retirement portfolios? And I would hope, and my sincere hope is that people use or at least millennials who have seen the Great Recession, and now they're seeing something like this happen again, that they increased their cash holdings to get through things like unemployment or being furloughed. I think that's very different from finding young investors putting the majority of their money in bonds. I generally think that's somewhat of a myth. Usually you do not see in a 410k for a late 20 early 30 something year old, you know, them investing like they're a 70-year-old with a large over allocation of bonds. I think it's really about how their cash savings is being utilized.

JEN ROGERS: So you think that it's OK if you had to pause your contributions in all of this craziness. But what about if you have to draw on them? What are you advising people if they need money? Is this the time that you would say, OK, you can go and tap that 401k right now, or maybe make an exception? Or is that just off limits?

DOUGLAS BONEPARTH: Yeah I view that as really kind of one of the pools of last resort to grab money. I totally understand that it may come down to that. You know, in dire circumstances when you're looking at what you have available, and if the only thing is your retirement money, I get it. You've got to put food on the table. You have to eat. But there are a number of things that I would hope with proper planning you would draw down against before getting there. And when thinking about 401ks, you can even perhaps take a loan against that money before actually taking hardship withdraws, or things like that where you're actually taking money out of those investments. But look, you know uncertain times, it gets very scary. People lose jobs. Let's not pretend like, oh this is horrible. I mean, what's the alternative? You have to think about that.

MYLES UDLAND: You know Doug, when you've been on we like to talk about things unrelated to investing. We've talked about coffee in the past. I want to ask you about the suburbs, because I think there's a big conversation right now certainly among my peer group of you know what young people do next with their lives? Is this the time to leave the city? Is this accelerating some trends that we've seen in place? Do you think that some of these trend stories around millennials are finally fleeing to the suburbs, do you think this stuff is going to stick or is this just, we're all really stressed out right now having a lawn sounds nice. But maybe this isn't the best time to make a wholesale decision on where you sort of set up camp with your family?

DOUGLAS BONEPARTH: Yeah, it's a great question. And it's something I'm actually following quite closely. I know a lot of friends who have sold their home, or bought a home, or have done simultaneous transactions. And what's most interesting to me is that COVID 19 has not stopped closings from happening. So it's happening right now. I think we will see a further demand for living outside of the big cities. I don't think anyone really wants to leave too far away, especially if their jobs and those opportunities are there. But I think a lot of it's children driven. We have a lot of friends, you know, who just had their baby, has just had kids in New York City, are still there. And it's a very different story about what they are able to do and how they feel versus our friends here in the suburbs of New York. Look, I can walk around outside and you know, when parks open, take the kids to the park and get some fresh air. That's going a long way here. And I think we'll see a further demand for that. It'll be interesting to see what kind of supply there is out here in the burbs. It's a very high priced area. So I'll be keeping my eyes peeled on those estimates.

MELODY HAHM: Hey Doug. One of the areas that I've been following closely too was college bound students. And considering gap years, taking time off, but then revisiting those initial thoughts because what would they do with that gap year if they're not even allowed to travel, if they can't be doing anything really interesting during that time. Are you finding that to be the case with people who originally were planning for early retirement? Because as you think about it, we saw that whole trend of, I'm 35, I retired early I lived abroad I'm traveling the world with my spouse and my kids. How do you anticipate that really shaping out amid this crisis?

DOUGLAS BONEPARTH: Yeah so I'll address that from two perspectives. One, the people that are in college or college bound, I think that's probably one area to keep your eyes peeled on. I mean, if you were paying tuition dollars to get, you know, education and experience, right and allocate that however you want, and the experience is now fundamentally changed, is it going to open the eyes to those in college or college bound to say, you know hey, this might not have the ROI on it given that the experience function has changed. Now flip over to retirees or even earlier retirees, will this make them, I guess, continue working because they feel that they need to continue working here? And I think there is something to be said about that as well. Will they continue doing that? Will they stay longer in their jobs? I don't know. I think there's probably a bigger question mark there than I have on the college front.

MYLES UDLAND: All right. Doug, I think the last-- well maybe the second to last time I saw you was at a concert. I don't know if we're going to be at a concert anytime soon, but it's good to see that you're doing well. Douglas Boneparth, the President of Bond Fide Wealth. Always good to get your thoughts. We'll talk to you soon.

DOUGLAS BONEPARTH: Great to see everyone. Thanks.