With the approaching retirement of baby boomers, the importance of saving for retirement is frequently discussed while spending in retirement is often overlooked. Most people assume they know how to spend their money. But it takes planning and diligence to ensure that assets last for several decades of retirement. And planning for one’s financial legacy can be a vital part of the process.
A recent Thrivent Financial survey of retirees and pre-retirees revealed that most were clueless about how much money they will need in retirement and many were off base with their actual spending in retirement. In fact, 56% had miscalculated their monthly spending in retirement, with 29% spending more and 27% spending less than expected. Further, just 1 in 5 retirees had worked with a financial advisor during his or her first 2 years of retirement to discuss spending and drawing down one’s savings.
When clients begin retirement, they shift from saving to spending. While this transition sounds easy, the Thrivent Financial survey showed that many retirees are struggling to manage their day-to-day finances. It’s easy to see how pre-retirees and retirees can postpone or forget about legacy planning. However, there are several strategies you can use to help clients prepare for the future and help you position yourself as an invaluable financial resource throughout their retirements.
? Use retirement income planning to minimize clients’ risks of outliving their assets. Future gifts to family, friends and charities are meaningless if there are no assets to distribute. Thrivent Financial maximizes income throughout retirement with a 3-part strategy: (1) diversify portfolios to maintain growth; (2) ensure a steady stream of income while retaining flexibility; and (3) provide guidelines to assist with the right balance of spending and investment. Financial plans are evaluated each year to provide personalized guidelines on how to adjust investments and spending based on changing needs and conditions.
? During client meetings, discuss family relationships and legacy intentions. Your next generation of clients could be a question away! By asking clients about their families, you achieve several goals: you uncover sales opportunities with parents, siblings, children and grandchildren; get to know people who may influence your clients’ finances in the future; and discover how clients want to distribute their assets and if they want to make charitable gifts.
? Review beneficiary designations and estate-planning documents with clients. Touch base with clients every year or when they experience major life changes to ensure they have up-to-date wills, beneficiary designations, asset tilting and other estate-planning documents. If clients consolidate assets with you, help them properly update the corresponding beneficiary forms. This is an opportunity to showcase your expertise and learn more about clients’ assets, estate plans and giving goals.
? Use insurance checkups to help clients build financial safety nets for loved ones. Position insurance as part of clients’ retirement income and legacy plans. Show clients how life insurance can assure quality of life for surviving spouses or family members or pay estate taxes. And discuss how heirs will receive tax-free proceeds and avoid probate.
With survivorship life insurance, clients can insure two people under one contract and use proceeds to meet wealth replacement and charitable giving goals. Long term care insurance can preserve assets while paying extraordinary care expenses; and disability income insurance can keep retirement savings intact if they are unable to work. Adequate health care and homeowners’ coverage are also critical.