As a financial advisor you know that Social Security likely won’t cut it in the future. The political situation around the long-standing pool of money is anything but stable and the cost of living and healthcare keeps going up. This likely is a very real, very stressful aspect of retirement that your clients are facing— even for the affluent.
The most imposing part of this challenge is that most people who are approaching retirement age who have a retirement plan think they’re set up for their lifestyle into their retirement years. But one question that continues to go unanswered for many is, “how will I create lasting, sustainable income in retirement?”
Starting the Conversation
If you’re an advisor, you may recognize this but have clients who are convinced they will be ok and they don’t want to talk about it any further— especially when it involves their health.
One solution that many retirees have found is that they can take a part-time job or only partially retire to supplement their income. If your clients think they’ll be able to continue to work, it’s important to have the conversation about their health early, because chronic illness can derail otherwise solid planning.
What is Sustainable Income?
In an interview with Barrons, Nobel-prize winning economist William Sharpe tried to give some insight into what sustainable retirement income would look like. One of the more interesting strategies he illuminates is “buckets” of annuities and investment for each year of retirement instead of drawing a fixed percent from a single large investment.
However, he does warn that navigating a complex situation like retirement income might be more than the average retiree is willing to handle. This, obviously, is where you come in. There is no right or wrong way to handle the flow of money in retirement, except to make sure that there is enough to align with the desires of your clients.
Annuities and investments can be overwhelming even to financial advisors at times. Helping to create income retirement that your clients can count on is what they’re relying on you to do. Likewise, it’s what can make the difference between (hopefully) a relaxing and joyful retirement and a stressful, penny-pinching one.
It’s important to keep in mind that not every client will keep you on indefinitely either. They may seek your services only to help create their plan and then manage it on their own. While it’s never fun to lose a client, these people can help hone your skill set of creating lasting retirement income for future advisees.
Discussing sustainable retirement income with clients can’t happen without a discussion about long-term care and health care costs. Michael Valdez, CFP®, AIF, CLU, from Synergy Wealth Alliance says that a conversation with clients about “wealth preservation is also about who they are and what they want to do with their life— their big-picture purpose.”
Valdez also believes that wealth preservation and retirement income comes down to early planning and leveraging available tax-advantaged funds. Rather than pulling from planned income to pay for long-term care or other health care expenses, early planning and asset reviews can ensure clients have a steady income for the entirety of their remaining lifespan.
There’s a lot of uncertainty in the world today, markets that go up must come down and any time your clients are reliant on government programs for income could spell trouble. Be aware of those clients that are approaching their retirement years and be sure to have a real, transparent conversation about how they plan to fund their retirement regardless of the uncertainties.