Are Your Clients Ready For Retirement?

By Julie Stewart

Baby boomers should have at least $1 million of investable assets to generate adequate income for the duration of their life expectancy, according to a report by the Insured Retirement Institute. Note, that figure doesn’t even include Social Security benefits.

Are Your Clients Ready For Retirement?

In order to effectively assist your clients in designing a retirement plan that allows for income they cannot outlive, we must first identify the income gap. This is the space between what your clients are currently bringing in and what their projected expenses look like in retirement.

An important question to ask: How much income do your clients believe they need in order to live comfortably throughout retirement? Are they falling short? If so, they will need to change the way they think about retirement planning. Here’s how you can help.

Take A Comprehensive Approach

In order to effectively plan for an income gap, advisors can guide their clients through three questions to begin constructing the retirement road map.

1. What does retirement look like to you? What will you be doing; how will you spend your time and how much do you think this will cost? Assigning a cost is of the utmost importance because it gets your clients really thinking if they are even ready to “replace their income” and maintain their lifestyle. Let’s be real: Life. Costs. Money.
2. When do you want to retire? This question gets your clients involved and accountable for their ideal retirement timing. From a financial professional perspective, we must know “when” in order to make appropriate recommendations.
3. Why is this important? Why are the “what” and “when” important? This is your clients’ motivation to take action. This is also where you will really get to know them. They will share, perhaps, what they witnessed with their parents or grandparents, or they simply may say that they’ve worked hard and want to retire when and how they want! Either way, you can craft a solution based on what is most important to them.

Next Steps

Look at all avenues and sources of income including Social Security, pension plans, retirement accounts, savings and perhaps even real estate investments before you begin planning.

The idea is to ensure that your plan fills the gap while also leaving enough cash on hand just in case life happens. Emergencies and unexpected expenses will always come up. The difference between a good plan and a great plan is looking at the big picture.

Here are a few strategies to recommend if there is a gap between their current pace and future goals:

Spend Less, Save (And Invest) More

Small increases in savings rates can make a big difference over time. Also, boomers age 50 and older can make “catch up contributions” of $7,000 per year toward their workplace retirement plans. Depending on age, consider reallocating assets into more aggressive investments.

Get Money Off The Sidelines

A fixed rate product such as an annuity is an effective way to better use cash that isn’t earning much. Also, consider repositioning conservative assets into fixed indexed annuities built for account value growth, no risk and no fees. When you build in downside protection and help the client understand the power of zero, tax-deferral takes care of the rest.

Fixed indexed annuities have come a long way - not only providing safety of principal with upside potential but also the guarantee of lifetime income when clients are ready to retire. Fixed indexed annuities could be a great tool to help clients “retire their job, not their income.”

Delay Retirement For A Few Years

This has a dual benefit. For one, your clients will have a few more years to accrue capital. Second, Social Security payments can be increased by 32% if clients wait to retire until the normal retirement age. If your clients work longer or have outside assets, they can delay Social Security as far out as age 70 while receiving a deferral credit of 8% each year they wait.

Make sure that when your clients are finally ready to retire, they will be in a better position because of the plan you helped put in place.

Julie Stewart, CAS, is an annuity wholesaler with Crump Life Insurance Services. Julie may be contacted at [email protected].

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