Icicles hang from the sign for State Highway 195 on February 18, 2021 in Killeen, Texas.
Joe Raedle | Getty Images
The threat of climate change is altering the retirement plans of some older Americans.
Extreme weather conditions such as hurricanes, floods, freezing temperatures and wildfires have made some rethink where they will spend their golden years.
“Clients see it for themselves and start adjusting their plans accordingly,” said John McGlothlin III, a certified financial planner with Southwest Retirement Consultants in Austin, Texas.
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One client, who was planning to retire in Galveston, Texas, was unprepared for the surge in flood insurance costs, he said. While the average cost of flood coverage in Texas is $ 700 per year, premiums may be higher in some areas.
Another Austin customer suffered from deep frost and power outages in the area in February. When the pipes froze and their condo flooded, they began to question their long-term plans, McGlothlin said.
With the possibility of another cold snap, further damage to the house, or future displacement, they reconsider where they live. But there is a problem: the unit may not fetch the same price after the flooding, he said.
Falling home values can create another problem for retirees, however.
With less equity in their home, retirees may have limited flexibility to use their property to pay for long-term care expenses or other health care costs, McGlothlin said.
“We just have to be very careful about what the environment is going to do to real estate and what that means for long term pension plans,” he said.
Not a concern for all retirees
While some retirees worry about the risks of hurricanes, deep freezes or forest fires, others are less concerned about climate change.
“From what I’ve seen over the past five to 10 years, extreme weather has not had a noticeable impact on pensions,” said Matt Stephens, CFP based in Wilmington, in North Carolina, and founder of AdvisePoint.
Although the coastal area of Wilmington has seen hurricanes and flooding, it is still a popular spot for retirees, especially on the waterfront, he said.
“People are clamoring for these properties,” Stephens said.
When choosing a place to retire, many clients want to be close to family, scenic landscapes, mild weather, and a reliable hospital system, he added.
Additional insurance costs
Whether retirees stay or leave, they may face increased home insurance costs in some areas.
In North Carolina, people living east of Interstate 95 must purchase separate wind and hail coverage in addition to their home insurance policy, Stephens said.
The average cost of wind and hail insurance in North Carolina can reach nearly $ 1,700, reports The Zebra.
“Wind and hail insurance has increased steadily over the years,” he said.
Additionally, those who live near water may need flood insurance, spending an average of $ 739 more per year in North Carolina, according to ValuePenguin.
And it can be difficult to find coverage for certain types of natural disasters. For example, those who live in places prone to forest fires may struggle to find affordable insurance.
“If you have a house in the Rockies, you’re either going to have a hard time finding insurance or you’re going to pay a heavy price for it,” McGlothlin said.