Using retirement planning data to grow AUM in 2025

By Ron Mastrogiovanni

Advisors should lean into conversations with clients and prospects about a range of retirement planning scenarios. With looming Social Security solvency deadlines, rising health care cost inflation, and wholesale change in Washington, it makes little sense to delay planning review discussions in the hope of greater certainty of what comes next.

Now is the time to look at these critical topics as an opportunity to engage with clients and discuss their impact on the retirement planning process. This goes to the heart of advisors’ skill sets and value proposition.

The key question is, what is the best way to do this?

The constants of retirement planning have not changed

One starting point is to engage around three constants that remain key to successful planning, and to reiterate the value of taking a long-term view of retirement goals and the savings that will be required to reach them.

Although there is always the risk of year-over-year volatility or even a black swan event, historical average returns for a “growth and income” portfolio remain steady at around 6%.

Social Security will continue to be a key program for retirees – even if benefits are ultimately reduced due to government action (changes to the program that extend solvency but reduce payouts) or inaction (no changes are made, and the trust fund is only able to pay a portion of promised benefits).

Finally, when it comes to planning for health care in retirement, the 40-year trend of medical expenses rising between 1.5 to 2 times the Consumer Price Index remains a valid guide to framing future cost expectations.

Wild cards need to be understood and planned for

There are potential wild cards when it comes to Social Security and Medicare. These also provide a basis for discussions with clients to make savings or investment decisions.

Social Security

Unless steps are taken to address Social Security’s funding shortfall, there will be an increased risk that the program in its current form will only be able to only 79% of promised benefits starting in 2033. It is important to note that the recent passage of the Social Security Fairness Act – which provides additional benefits for some public sector workers – will only shorten the program’s remaining solvency.

Current and future administrations have several options to address Social Security’s funding needs, including increasing contributions to the program and delaying the full retirement age. Although significant cuts to benefits look increasingly likely, they are by no means certain.

Medicare

Health care costs will be one of most significant expenses retirees will face - and perhaps the most significant expense. It is one of the most significant expenses for the U.S. government. With the Trump administration looking closely at costs, the minimum expectation should be for a continuation of the long-term trend of shifting a greater burden of health care expenses from the government to retirees.

With health care inflation driving expenses higher and contract renewals approaching for major carriers, premiums may well increase for current and future retirees at levels that outstrip historical averages. With demographic shifts increasing the number of retirees on Medicare and the impact this is having on the federal budget, the potential for additional changes to the program is significant. Ensuring that clients have the funds to address future health care needs continues to be a priority.

Data is a starting point for retirement planning conversations

Given the solvency challenges facing the Social Security trust fund, it is likely that lifetime benefits will be lower for future retirees. A possible reduction of between 10% and 21% starting in 2033 would mean that an average 55-year-old couple would see future Social Security payments lowered by $139,000 to $292,000 if they claim benefits at age 65 through actuarial life expectancy.

To address this income gap, the couple would need to allocate an additional investment today of between $38,000 and $79,000, assuming a 6% average return.

For the same 55-year-old couple, lifetime health care expenses are projected to be $582,000 for Medicare Part D and Medigap Plan G premiums (Part B premiums are assumed to be funded by Social Security deductions). In that growth portfolio, they would need to put aside today $137,000 address these future premiums.

For both Social Security and Medicare, sharing this data provides a powerful starting point for engaging clients in discussions around their individual needs, and what needs to be done to address them.

Data drives assets under management

We have seen leading financial institutions increase annual AUM by nine figures, as advisors grow existing assets and win new business. Allocations for retirement portfolios and products increase by 20% or more when personalized health care cost-projection data is shared with clients.

Leveraging planning data at the prospecting stage of the new client acquisition process or with existing clients is a powerful way to engage them, demonstrate value, differentiate expertise and increase wallet share.

Running the numbers to highlight the impact of the range of Social Security and health care scenarios for each client’s unique circumstances, risk appetite and retirement goals, is key to not only addressing client concerns, but advisor differentiation.

Rather than looking at planning data and tools as the last step in building a retirement plan, a top-of-the-funnel approach to using it to drive new business, client engagement and product discussions – especially during this period of change.