How Climate Change Will Affect Retirement Decisions

For the first time ever, current and soon-to-be retirees are having to consider how to retire in the face of climate change. Everything from where to live to how to invest that life savings comes into question in the face of so much uncertainty and looming danger. Making such decisions is, to be sure, incredibly stressful. With that in mind, below are some of the ways that climate change will, and in many cases already is, affect retirement decisions.

Climate Change and Retirement: Where You Live

Current and future climate is clearly something that individuals should be thinking about when picking where to live, where to retire. Those are really essential issues when it comes to direct effects on the home, living close to nature, and how much time per year a person spends in a given location.

In many regions, such as major motorways, airports, and sewage treatment plants, rising oceans are endangering everything we take for granted. Wildfires and high heat are becoming more dangerous as a result of climate change.

Coastal towns are especially vulnerable. As the atmosphere warms, more water vapour is retained, resulting in tropical storms that drop previously unheard-of volumes of precipitation. Not only are the frequency and quantity becoming more unpredictable, but the locations of natural disasters are changing as well. Texas experienced an unprecedented cold snap in February of 2021 that killed and displaced people, as well as left millions without power.

Climate Change and Retirement: How You Invest

As a result of wildfires, deep freezes, hurricanes, and flooding, several seniors have changed their investment strategies. Many people, in addition to wanting to protect their investments, are looking for ways to make more environmentally-conscious investment decisions, including moving away from fossil fuels and adopting climate-friendly investments.

These so-called ESG investments, which stand for environmental, social, and governance, may target companies that are focused on low carbon, climate awareness, green bonds, clean energy, or other sustainable solutions. The particular investments and allocations differ for every client based on risk profile and portfolio makeup.

An investor with a moderate risk tolerance, for example, would allocate a small amount of their stock portfolio to green economy assets. This is because many of the investment opportunities are in nascent industries or in technologies that still have not received widespread support. Or, the investments might be undertaken out of a purely altruistic desire to do something positive, with capital gains and income being secondary.

Climate Change and Retirement: Insurance

The increasing frequency and severity of extreme weather-related events—from wildfires in the United States to record heat waves in Europe to floods in Japan—have brought insurance risk and climate change into sharper regulatory focus. With losses on the rise, insurers can no longer afford to ignore or postpone dealing with the effects of climate change on their underwriting, pricing, and investment decisions, as well as their bottom lines.

What this means from a retirement and climate change perspective is that retirees will have to be more conscious of where they choose to live and establish roots during their retirement based on insurance costs in various locations. Home ownership in some places in Florida, for instance, may become prohibitively expensive based on insurance rates alone. Or, alternatively, it may become impossible to get insurance for certain types of climate change-exacerbated natural disasters because the risk is simply too high for insurers.

Climate Change and Retirement: Whether You Own or Rent

If you’re considering selling your house and purchasing another (i.e. downsizing), make sure you’re aware of the expenditures. Do you intend to buy a smaller house or apartment without taking out a loan? That’s fantastic, but don’t forget about property taxes, maintenance, and insurance.

Furthermore, DIY house repairs and duties today—garden and lawn maintenance, storm window swapping in and out, gutter cleaning, and so on—might become challenging in the future. Hiring professionals to take care of this stuff for you can quickly increase your ownership costs.

Keep in mind that there is a beauty to living in a rental and sending the landlord a text when anything needs to be replaced or repaired. As people get older, that arrangement often works out better. You will also need to consider whether the cost of ownership is greater than the cost of renting and vice versa. This is especially true for single homeowners who do not have a spouse to share the burden of home maintenance.

Where climate change factors in here is whether or not it is too costly or too risky to own a home in certain areas. If you have your heart set on a snowbird retirement, maybe ownership in the more southerly location is not such a good idea. Perhaps continuing to own something smaller in the north, while renting in the location more impacted by climate change, would serve you better.

Climate Change and Retirement: Aging in Place

Aging in place refers to seniors spending their golden years as independently as possible in the communities and homes they are comfortable in. It is commonly cited as one of the keys to mental and physical health in old age and it is something that an increasing number of seniors hope to do during their golden years. When you factor in climate change, however, there are some realities to consider.

As discussed elsewhere throughout this article, one of the major implications of a dramatically changing climate is what that means for extreme temperatures in some of these communities. If aging in place means having to face increasingly temperature extremes in summer and winter, as well as the possibility of natural disasters like forest fires, floods and hurricanes, the communities most affected may not be suitable for aging in place.

If there is a real risk of evacuation or destruction of property, is it worth it to age in place in such a community? This will undoubtedly pose serious questions for seniors who are currently living in rural areas surrounding natural disaster areas.

Conclusion 

The human impact on the environment and climate zones around the world is the issue of the 21st century. It’s cascading effects touch nearly all other facets of life and it poses some serious challenges for people reaching the end of their lives, trying to decide where and how to live. These are challenges that no other group of human beings has had to confront in recent history, and it is undoubtedly stressful with so much at stake and so much uncertainty.

Naturally, people want their golden years to be as comfortable as possible, and in this era, that will involve some tough decisions and more diligent retirement planning. Keep in mind the above ways climate change will influence your retirement decisions and equip yourself with the knowledge and foresight to make good decisions.

For the first time ever, current and soon-to-be retirees are having to consider how to retire in the face of climate change. Everything from where to live to how to invest that life savings comes into question in the face of so much uncertainty and looming danger. Making such decisions is, to be sure, incredibly stressful. With that in mind, below are some of the ways that climate change will, and in many cases already is, affect retirement decisions.

Climate Change and Retirement: Where You Live

Current and future climate is clearly something that individuals should be thinking about when picking where to live, where to retire. Those are really essential issues when it comes to direct effects on the home, living close to nature, and how much time per year a person spends in a given location.

In many regions, such as major motorways, airports, and sewage treatment plants, rising oceans are endangering everything we take for granted. Wildfires and high heat are becoming more dangerous as a result of climate change.

Coastal towns are especially vulnerable. As the atmosphere warms, more water vapour is retained, resulting in tropical storms that drop previously unheard-of volumes of precipitation. Not only are the frequency and quantity becoming more unpredictable, but the locations of natural disasters are changing as well. Texas experienced an unprecedented cold snap in February of 2021 that killed and displaced people, as well as left millions without power.

Climate Change and Retirement: How You Invest

As a result of wildfires, deep freezes, hurricanes, and flooding, several seniors have changed their investment strategies. Many people, in addition to wanting to protect their investments, are looking for ways to make more environmentally-conscious investment decisions, including moving away from fossil fuels and adopting climate-friendly investments.

These so-called ESG investments, which stand for environmental, social, and governance, may target companies that are focused on low carbon, climate awareness, green bonds, clean energy, or other sustainable solutions. The particular investments and allocations differ for every client based on risk profile and portfolio makeup.

An investor with a moderate risk tolerance, for example, would allocate a small amount of their stock portfolio to green economy assets. This is because many of the investment opportunities are in nascent industries or in technologies that still have not received widespread support. Or, the investments might be undertaken out of a purely altruistic desire to do something positive, with capital gains and income being secondary.

Climate Change and Retirement: Insurance

The increasing frequency and severity of extreme weather-related events—from wildfires in the United States to record heat waves in Europe to floods in Japan—have brought insurance risk and climate change into sharper regulatory focus. With losses on the rise, insurers can no longer afford to ignore or postpone dealing with the effects of climate change on their underwriting, pricing, and investment decisions, as well as their bottom lines.

What this means from a retirement and climate change perspective is that retirees will have to be more conscious of where they choose to live and establish roots during their retirement based on insurance costs in various locations. Home ownership in some places in Florida, for instance, may become prohibitively expensive based on insurance rates alone. Or, alternatively, it may become impossible to get insurance for certain types of climate change-exacerbated natural disasters because the risk is simply too high for insurers.

Climate Change and Retirement: Whether You Own or Rent

If you’re considering selling your house and purchasing another (i.e. downsizing), make sure you’re aware of the expenditures. Do you intend to buy a smaller house or apartment without taking out a loan? That’s fantastic, but don’t forget about property taxes, maintenance, and insurance.

Furthermore, DIY house repairs and duties today—garden and lawn maintenance, storm window swapping in and out, gutter cleaning, and so on—might become challenging in the future. Hiring professionals to take care of this stuff for you can quickly increase your ownership costs.

Keep in mind that there is a beauty to living in a rental and sending the landlord a text when anything needs to be replaced or repaired. As people get older, that arrangement often works out better. You will also need to consider whether the cost of ownership is greater than the cost of renting and vice versa. This is especially true for single homeowners who do not have a spouse to share the burden of home maintenance.

Where climate change factors in here is whether or not it is too costly or too risky to own a home in certain areas. If you have your heart set on a snowbird retirement, maybe ownership in the more southerly location is not such a good idea. Perhaps continuing to own something smaller in the north, while renting in the location more impacted by climate change, would serve you better.

Climate Change and Retirement: Aging in Place

Aging in place refers to seniors spending their golden years as independently as possible in the communities and homes they are comfortable in. It is commonly cited as one of the keys to mental and physical health in old age and it is something that an increasing number of seniors hope to do during their golden years. When you factor in climate change, however, there are some realities to consider.

As discussed elsewhere throughout this article, one of the major implications of a dramatically changing climate is what that means for extreme temperatures in some of these communities. If aging in place means having to face increasingly temperature extremes in summer and winter, as well as the possibility of natural disasters like forest fires, floods and hurricanes, the communities most affected may not be suitable for aging in place.

If there is a real risk of evacuation or destruction of property, is it worth it to age in place in such a community? This will undoubtedly pose serious questions for seniors who are currently living in rural areas surrounding natural disaster areas.

Conclusion 

The human impact on the environment and climate zones around the world is the issue of the 21st century. It’s cascading effects touch nearly all other facets of life and it poses some serious challenges for people reaching the end of their lives, trying to decide where and how to live. These are challenges that no other group of human beings has had to confront in recent history, and it is undoubtedly stressful with so much at stake and so much uncertainty.

Naturally, people want their golden years to be as comfortable as possible, and in this era, that will involve some tough decisions and more diligent retirement planning. Keep in mind the above ways climate change will influence your retirement decisions and equip yourself with the knowledge and foresight to make good decisions.