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How You Can Best Help Clients With Retirement


How confident are you that your clients are wise enough to engage your services to help them with retirement planning? How confident are you in helping them?

Oct 9th 2019
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A recent GoBankingRanks 2019 survey indicating 64 percent of Americans might retire with less than $10,000 in retirement plan savings. Nearly half weren’t concerned about the amount they’ve saved.

Why Get Involved in My Client’s Problem?

The gateway is financial planning. Do you offer it to clients? Do you offer any services beyond basic tax filing? The answer is probably yes. If your client is avoiding thinking about their problematic retirement planning, you can help focus their attention without scaring them to death.

You have several advantages. You are selling your expertise and time, not products. You are a fiduciary, putting the client’s interests first. You have an ongoing relationship with your client. You’ve proven yourself. This ongoing relationship means you are serious about providing ongoing guidance in the years ahead.

How to Talk Them Off the Ledge

Your client likely knows their retirement is underfunded. They probably don’t know the scale and assume the worst. They might even make wildly optimistic assumptions like reducing expenses and living on Social Security alone. Their plan might involve selling their house at a wildly inflated price, downsizing and living off the remainder. They might believe everything will be fine is the stock market turned in a 15 percent annual return forever.

You need to bring them back to reality without scolding them for not having saved more. If your client is an executive or professional, they know most problems have solutions, but you need a plan and measurement points along the way to track progress.

9 Steps to Proper Retirement Planning

Step One: Financial planning. Make the case why they need a plan. Retirement planning is a key reason, but there are others.

Step Two: Get buy in. How do they envision retirement? What kind of lifestyle? Where will they live? What will they do? All this begins to create a picture of what they have worked to achieve.

Step Three: Cost it out. Many people assume they will spend less in retirement because you don’t need as many suits and you eat fewer lunches out. Retirement might actually cost more because you will want to travel or take up other pursuits. Your financial planning tools will be able to project an expense level from the moment they retire until an agreed upon target date.

Although the average lifespan in the U.S. is about 79, it varies by state. USA Today showed Hawaii having the longest at 81.3 years and Mississippi having the shortest at 74.7. Since these numbers vary widely by factors including access to excellent healthcare, your projections might assume they might live to age 100. Living costs go up over time.

Step Four: Let’s talk assets. Our client likely has at least one income stream, Social Security. There might be other small pensions out there too. They might have an annuity and should have some tax-deferred and other taxable assets. There might be annuities or insurance policies too.

Your client is likely putting money aside in their 401(k) and doing other saving in the meantime. A company stock purchase plan is a good example. Based on asset allocation, your financial planning software projects their investment returns in retirement.

Here’s a ray of sunshine: Traditionally, people have been raised to “preserve the principal while spending the interest.” Retirement planning is more dynamic. Generally speaking, the object is for the last check to clear at age 100. Leaving a legacy of principal is optional. Also, financial planning usually doesn’t assume you are selling your home unless you build that into the plan. It focuses on financial assets.

Step Five: What If Scenarios. Financial planning doesn’t just spit out one result. It often uses a Monte Carlo analysis to provide best and worst case scenarios. These are accompanied by probabilities. Your client should likely accept the result with the highest probability as the most likely outcome.

Step Six: Where are we now? Your client’s greatest fear might be here in black and white. On the positive side, you have “Defined the problem.” Your analysis might show based on their desired spending and current asset allocation, their money might last them to age 100 or run out at an earlier age. FYI: According to Schwab (as reported by CNBC) people feel they’ll need $1.7 million is assets to retire. (4) Most people don’t have anywhere near that amount.

Step Six: Proposing solutions. Here’s where you are adding value as their accountant. Would they be agreeable to working longer before retiring? This lengthens savings years and shortens spending ones. Delaying collecting Social Security should mean higher payments when you start receiving checks.

Would they be agreeable to spending less in retirement, reducing their desired lifestyle? Spending less leaves more in the money pot.

Could they save more during their working years? This emphasizes the importance of starting retirement planning as early as you can. According to Nationwide, the average American starts saving for retirement at age 31. Your client might be considerably older, but hopefully they are in their peak earning years.

There are other considerations? Does retirement mean your client completely stops working? Although their fear is being a greeter in a big box store, working part time in retirement might mean they are consulting within their industry. Your client might plan on downsizing their home. This might free up a chunk of cash.

Step Seven: Asset allocation matters. A serious problem might be how your client’s assets are spread across stocks, bonds and cash. Your client’s projected asset growth might be constrained by a conservative leaning towards fixed income and cash. You might show how different asset allocations might perform, using indices as a proxy for investment vehicles.

Your client might like the potential for higher returns, but they need to be aware of the risk they are taking onboard. They will likely need a financial advisor to help them implement their financial plan.

Step Eight: Do we have a plan? Hopefully, the additional scenarios you ran in Steps Six and Seven have yielded a plan your client is comfortable with and is realistic. Their retirement anxiety should be reduced, provided they fulfill their commitments.

Step Nine: Monitoring the plan. Their plan requires attention. It’s not “one and done.” Like their doctor prescribing medicine, they need follow up visits to confirm they are following the program.

Retirement planning can be scary for most Americans. It’s an area where accountants can increasingly add value.

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