Preventing Surprises as Your Clients Plan for Retirement

Journal of Financial Planning: July 2021


Retirement planning is getting trickier all the time. Companies are doing less for their employees, and it is falling on the individual to wade through the new waters of planning for their long-term health and retirement as they age.

Julia Kagan wrote an article in Investopedia titled “These five steps will help you toward a safe, secure, and fun retirement,” which outlines some of the measures that individuals should take into account. But these are also important points that financial advisers can discuss with their clients to help guide them toward a healthy and effective retirement.

Make sure your clients have a realistic timeline for their investments. Generally, younger people can afford the risk that comes with stocks, which provide higher returns in the long term. People getting much closer to retirement might be better served investing in bonds and less volatile assets.

Make sure your clients properly assess their spending in retirement. A lot of people expect that they will spend less once they retire. That is usually not the case for a variety of reasons. Don’t let your clients get away with planning on spending less than what is likely.

Make sure your clients understand after-tax rate of returns. After a proper investment strategy and likely spending amount is settled upon, you can determine how much returns would be needed to support them. Anything over 10 percent is hopeful, at best.

Make sure your clients understand the risks of their investments. Different investments have different risks, and every client has their own tolerance. It’s important that they don’t overreact to daily market swings and the business cycle in general.

Make sure your clients stay on top of estate planning. There are plenty of extra costs associated with leaving behind an estate, including lawyers, accountants, and life insurance. Various taxes on an estate come into play, depending upon how it’s allocated.

These and many more aspects can leave individuals feeling overwhelmed, and might begin to dismiss important variables when planning for their retirement and continued well-being. By taking a holistic approach with your clients, you can fill their retirement sails with wind to steer them into a post-work period devoid of nasty surprises. 

Retirement Savings and Income Planning