Climate change is testing how much control boomers and Generation X will have over their retirement. Safe and active post-career living demands clear-eyed planning — and getting more answers from real estate and insurance professionals.
The images were shocking: tidy rows of suburban houses ablaze as a wildfire ripped across the open prairie now populated by fast-growing Louisville, Colo., whose 20,000 residents are nestled perfectly between desirable Boulder and Denver. Some 1,000 homes were a total loss and tens of thousands of residents fled the deadly December fire that flared up unusually late in the season, kindled by a multiyear drought.
The reality is, climate-change impact is already being felt. Natural disasters aren’t new, but their frequency and staying power are intensifying. And key sectors that factor into retirement considerations — real estate and insurance — are lagging in their preparation for a new-normal. According to many experts, climate change poses a potentially dangerous future in some locations even if a warming atmosphere can be slowed by global efforts to swap high-emission oil and gas for solar, wind, hydrogen and nuclear power, and by incentives to eventually designate all gasoline-powered cars for scrap metal and replace them with electric vehicles, electric bicycles and improved public transportation. Some of the warming effects just can’t be reversed.
Be informed: What does science tell us? Every summer, from Miami to Cape Hatteras, N.C., people prepare for a possible hurricane. Residents get ready to shelter in place behind hurricane-grade windows or pack an overnight bag and crate up their pets to flee via a designated route to safety. When big storms do hit, which they tend to do every five to seven years, television broadcasters rapidly descend to cover the chaos and damage.
If it’s not rising water that’s raising concerns, it certainly is an expanding tinder box. A report by the United Nations Environment Program estimates that with even moderate temperature increases, the number of extreme wildfires globally will increase by as much as 30% by midcentury and 50% by 2100.
Real estate agents, mortgage lenders and other professionals in the industry believe buyers aren’t asking enough climate-change questions, especially if they plan to stay in a property for years — and the industry isn’t feeling compelled to disclose much either. It’s true that many factors impact housing prices. Even though California experienced five of the state’s six largest wildfires in state history in 2020, overall housing demand meant that even devastated wildfire communities experienced jumps in home prices, a phenomenon that some said only puts more people in harm’s way since there’s little incentive to take preventive fire measures.
”The second factor when it comes to retirement and climate change is this concept of duration mismatch … the information that people are looking at is the wrong time horizon for the decision they’re making. It’s like looking at a potential partner at 18 years old. And reassessing that partner at 48. Maybe not such a great match,” he said.
Insurance: a reckoning in the making Led by the deadly and costly Hurricane Ida in the U.S.and massive flooding in Europe, the world racked up $329 billion in economic losses linked to severe weather in 2021, and only 38% of that bill was covered by insurance. And perhaps the biggest change to date comes from the federal flood insurance program, which is also attempting to update its flood-zone maps.
That Fine Print Matters More than Ever Homeowners face potential tests to the scope of their insurance coverage already, and climate change will only add to the challenge, said Brian Patillo, vice president of Goosehead Insurance, an independent brokerage which compares several carriers to find the best fit for an individual policy-holder.
“If you have a career pension or 401, likely you’ll be able to handle more robust insurance demands,” Bowen said. “But there is a non-negligible portion of current retirees or those close to retirement age who simply don’t have enough money to retire, yet alone have enough insurance in retirement. We saw that after the fire in Paradise, California.”
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