How to Tell Clients They Can't Retire Yet

It is tough to give clients the news that their finances won't support their desire to retire from work immediately. Here's how five top advisors handle that situation.

Rick Brooks, CFP, CFA; Blankinship & Foster LLC; Solana Beach, Calif.

Part of how we break it to them is our presentation. We list a matrix of potential returns and inflation assumptions, then show the long-run maximum sustainable spending under each condition. The center of the matrix (our core assumptions) should equal the cost of their expected retirement lifestyle. If it does not, then we point out that, under a certain set of assumptions, it does not appear they can achieve the goals they have outlined.

We will then go on to show scenarios under which their goals can be achieved, such as working longer or working part-time, cutting expenses early to save more, or cutting out some of the more aggressive goals (like a second home or toning down their auto replacements). We will also send the client home with the analysis and ask them to come up with a scenario that we should run.

Lauren G. Lindsay, CFP; Personal Financial Advisors LLC; Covington, La.

We use Money Guide Pro which allows us to put the clients' ideal retirement situation in and then show what modifications need to be made for it to work, side by side.

This has been great, because we can show what would be needed to make the early retirement work: more savings, higher return, working part-time and usually we can come to some kind of solution based on that. I am seeing lots of folks who don't want to fully retire even when they can, for fear of boredom and lack of routine.

So sometimes it is just letting them leave that job to do something else, or work less, or consult, which makes them happy. I also think we are redefining "early" since I am not seeing too many folks retiring fully much before 65 or 70.

Eve Kaplan, CFP; Kaplan Financial Advisors LLC; Berkeley Heights, N.J.

I've walked clients through several scenarios to encourage them to postpone retirement. Here are the steps:

1. Take the client request to retire at 62, for example and run a financial projection. The software I use clearly gives the client a "probability of success" score (Monte Carlo) that takes into account amount of money saved, amount of money needed for retirement, a snapshot of current investment assets, etc.

2. I subsequently run other scenarios (e.g. retire at 63, 64 and 65) to show how each year of postponed retirement adds to the pool of savings and eliminates tapping investment assets by each additional year.

3. The client clearly can see the "ideal" versus "acceptable" (retire later) numbers in visual form.

As the old Chinese adage goes, "one picture is worth a thousand words." These visual images of "preferred" versus "recommended" retirement help the client to come to terms with postponing retirement.

Kathleen Campbell; Campbell Financial Partners; Ft. Myers, Fla.

There is never an easy way to tell someone who came to me thinking they could retire soon that it's simply not in the cards if they want any hope of a financially secure retirement.

For the most part, the clients who want to retire soon are in their late 50s or early 60s.

From an emotional standpoint, I remind them that a 30 to 40 year retirement is a long time. I ask them what they will do for those years?

Sometimes one's outlook on life becomes a matter of changing perspective.

Rather than focusing on the need to quit work, why not focus on the need to continue working in order that your retirement years will be more pleasurable?

I remind them that a retirement filled with scrimping on every dollar will not be pleasant. Who wants to eat rice and Vienna sausages for 30 years??!

Beyond that, I try to position their portfolio defensively. It's a fine line to balance growth with limited volatility and risk. I also encourage them to save, save, save. There is no strategy better than spending less and saving more.

Jerry Verseput, CFP; Veripax Financial Management LLC; El Dorado Hills, Calif.

I've had a few clients very recently that have needed their expectations tweaked concerning early retirement.

Retirement age is only one of the objectives that need to be looked at when helping a client make a decision on early retirement.

Lifestyle, retirement income, health issues, and gifting desires are among other issues that need to be considered, along with realistic expectations for investment returns and income generation.

When the retirement expectations do not match up with reality, all of the expectations are on the table, not just retirement age.

This allows the client to participate in the tradeoffs that need to be made, and I believe reduces the shock of simply dropping the bomb of "you can't retire when you thought you could."

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