Life Stages: A Successful Roadmap
To Pre-Retirement Planning
[These types of articles tend to be accompanied by lists of issues and things to consider for each life stage similar to the T. Rowe Price article]
As financial advisors know, each client arrives with a unique set of circumstances, needs and goals. Then, over time, their financial picture evolves as the client household reaches new personal and professional milestones. Anticipating these milestones will set the stage for the Many of these milestones correlate closely with distinct life stages.pre-retirement planning process.
Helping your clients understand their needs in each life stagewell before retirement dayw — ill be So regardless of a clients age, or the size of their net worth or household, understanding what stage of life your client inhabits will prove vital to building a mutually beneficial to both of you.partnership.For decades, company strategists and marketers have searched for an “ironclad” method of segmentation that would let them better respond to the transitions and changes that occur in a household over its lifetime. Perhaps the most resilient strategy has been to view a household in terms of a lifecycleor life stages.
With respect to financial strategies, these life stages can be depicted asThere are four distinct financial life stages in pre-planning for retirement: AaAsset accumulation, asset preservation and asset distribution, and asset transfer. Each stage influences how investors manage risk, diversify assets, protect savings and provide for their families. Between an investors first job and his or her retirement are many life-changing events. Navigating each life stage, and meeting financial goals along the way, requires sound planning and open communication between advisor and client.
It , and . it is critical to successful planning for each of the first thesethree stages to be addressed as early as possible. well before retirement day arrives. In addition to helping clients evaluate their resources, define their objectives and select appropriate investments, u And, achievable goals and comfortable life stages dont just happen for investors, nor can a comfortable retirement be achieved by simply throwing a little money aside here and there. Throughout these life stages, the need for a financial plan to prepare people for lifes changing events is always there.sing a life stage framework allows financial advisors to better anticipate client needs, especially as they transition from one life stage to the next. Anticipating needs is a sure way to keep clients satisfied and thinking clearly about their financial future.
Every stage, from asset accumulation to asset transfer, will impact how investors manage risk, diversify their assets, protect their savings and provide for their families. As a financial advisor, you can help them evaluate their resources, define their objectives, and select appropriate financial vehicles to meet their long-term retirement objectives, as well as navigate each stages life-changing events. As investors pass through the life stages, their needs, goals and priorities will changeso too should your advice concerning the stages and options they will need to secure their financial future and retirement.
Asset Accumulation. The asset accumulation stage is comprised of many firstsjob, marriage, house and child. With so many important life events, and so many large expenses, saving for retirement may seem impossible. Many young adults may have legitimate reasons for not saving, soPerhaps the most difficult obstacle to overcomechallenge is to convince theminvestors to take the early stages of the planning process seriously.
It is never too early to start saving, regardless of the amount. SEveryone seems to have an excuse for not saving, and many people simply feel that they can wait for a while before starting a regular plan of savings. But, the sooner an investor starts saving, the more he or she will have at retirement. Starting early gives allows an investors money assets more time to grow and compound and grow, creating more potential long-term growthplacing financial goals within closer reach. This is the foundation for a successful pre-retirement plan. Without a firm commitment to this stage by both advisor and client, there will be no post-retirement glory for either. The asset accumulation stage should be fairly obvious; however, statistics show that the majority of Americans are not saving as much as they should.
At this early stage, an advisors role is initially limited to providing sound, common-sense recommendations and encouraging clients to start the planning process as early as possible. During the asset accumulation stage, investors needFirst and foremost is to the need to develop a household budget, set upestablish an emergency fund and begin a program of start regular savings, perhaps through payroll deduction. Taking advantage of employer-sponsored in retirement plans (especially tax-deferred plans with company matches), accounts, start saving foropening a college savings account and establishing sound insurance coverage is a good start.
Helping clients select an appropriate asset allocation to meet their long-term goals is probably the most important advice that can be offered at this life stage. There are a variety of products specifically designed for the asset accumulation goals of the long-term investor. These products offer tax-deferred accumulation, professional money management, portfolio diversification, lifetime income options and beneficiary protection.
Asset Preservation. rotection eservation [it says Protection in the brochure]An investors The middle years of an investors life are likely to be the most difficult challenging and and stressful but also the most yet financially rewarding.they may produce the investors Furthermore, if asset accumulation is the foundation for a successful pre-retirement plan, asset preservation is the frame for that plan.
Even as clients reach the highest career earnings level of their careers, investors will likely be . Initially, investors may have to balancinge the financial needs of payin the need to payg for college for their children and the need to against the possibility of having to assist aging parents, while still making aregular contributions to their own retirement accounts. Eventually, after the children leave home, there is an opportunity to beef up retirement savings as household expenses decrease. However, an increasingly important concern during this stage is the need to protect accumulated retirement assets.
During the asset preservation stage, the needs of investors go beyond simple asset accumulation. WhileT there is still the need to contributeaccumulate assets, perhaps even to maximizee contributions, to ones retirement savingsas incomes rise.,