Expertly navigating retirement expectations and limits

By Phillip E. Harriman

Premier client service requires us to understand a client’s full perspective, especially when providing retirement advice. What are they focused on in that moment? Why are they interested in partnering with a financial advisor?

Often a client may not have a clear understanding of how to achieve their desired retired lifestyle within their timeline. To help them reach their goals, demonstrate the value of building their savings over time through an unbiased explanation of the benefits available to them.

Start with the basics: evaluating your client’s current retirement situation is essential to taking the right steps toward their goals. Begin with an audit of their current retirement accounts. For some, this could mean multiple retirement or Health Savings Accounts from past employers.

In contrast, those just starting in their career may not have set up retirement plans or have access to employer-provided accounts. The more you learn about someone’s financial history and retirement savings, the easier it becomes to customize a financial plan that provides realistic steps to a desirable retirement.

Lean on the knowledge gained

Leverage the experience you’ve gained about your client as you delve into specifics on retirement planning. For example, if they have multiple retirement accounts, offer suggestions on how to combine these funds. Consolidating the plans into one account could reduce fees and provide a clearer picture of progress in their savings goals.

For those new to investing, take this opportunity to explain what each type of retirement plan can provide for them. This is especially important if they have a 401(k) to which their employer contributes. Since the 401(k) has a higher contribution limit, clients should take the opportunity to build savings now to grow their capital immensely once they reach retirement age.

You can point out how adding, say $100 to their monthly contribution can add thousands to their account over time with employer contributions. Once you have built an understanding of the basics of retirement investing, consider further educating the client on retirement contribution limits before making an informed recommendation.

As retirement experts, advisors know that certain features of retirement plans make some more advantageous than others. Our clients may not be as well versed in the intricacies of what each plan’s contribution limits means for their portfolios. Again, take their priorities into consideration.

Talk about limits

If they are just beginning to save, it’s best to give an overview of what these limits are and how they can change annually. If the client is well-established in their career and looking to retire in a decade or less, you can provide guidance on which combination of investments would allow for the highest returns.

This is also the time to highlight what taxation will look like for their retirement plans. For someone who has more capital, it may be more worthwhile to pursue a Roth IRA with tax-free withdrawals since they can cover pre-contribution taxes now. For clients older than 50, there are additional contribution catch-ups they can take advantage of. Without a clear understanding of these limits, clients may be missing the opportunity to maximize retirement savings.

You can only provide the best financial plan if you understand both the emotional and financial side of a client’s situation. Making time to grasp where someone’s priorities are enables you to exceed their expectations. You must fine-tune financial and retirement plans to what the client needs now while also providing guidance on their long-term goals.

As you define the intricate details, the client will be able to better understand your recommendations and are more likely to achieve their goals.

About the author
For over forty years, Phil has worked with family-held and nonprofit businesses in the areas of business continuation arrangements, negotiation of compensation packages, and retirement and estate planning. He started his career with Maine Governor James B. Longley’s insurance agency in 1977. In 1983, he and Michael A. Lebel formed an independent insurance and investment brokerage firm – Lebel & Harriman, LLP. Phil is a 42-year MDRT, where from 2003 to 2008 he was a member of the MDRT Executive Committee, serving as its President in 2007.