Financial planning has historically focused on helping people achieve major financial goals, such as sending children to college or retiring comfortably.
But what about retirees, who, for the most part, have already achieved their goals and simply want to preserve their way of life? Life changes when you are living your goals rather than aspiring toward them. Suddenly, you have more to lose than to gain and you want to know how to keep what you have. Building wealth is not necessarily important in this stage of life, but preservation of wealth is vital. With more Americans entering this phase of life, there is a growing need for education on how to manage money within retirement. Ironically, there will also be a diminishing need for workshops on preparing for retirement, as the boomers are followed by the next generation, the Baby Bust group.
Consider these statistics:
- The largest growing population segment in our country is of people age 100 years or older.
- Within the next decade, most of the boomers will reach traditional retirement age. About 25% of the U.S. population–one in four people–will be retired.
- Many of us will spend more years in retirement than we did working.
Yet when you search on the internet for retirement workshops, you’ll find page after page of workshops that are almost exclusively focused on building wealth for retirement rather than managing wealth in retirement. No one seems to be educating retirees about managing their income and developing the right distribution strategies. Estate planning is well covered–probably because it’s a “goal” to provide money to heirs. But helping retirees to manage the money they have today, while they are still in retirement, is conspicuously absent in most financial education efforts.
What does this mean for your financial planning practice? If you’re a visionary and if you plan to be in the business for a long time, you should consider shifting your focus over the next few years toward managing wealth within retirement as opposed to preparing clients for retirement.
From our experience at Financial Finesse in educating retirement plan participants for our plan sponsor clients, there are four key areas where retirees need both financial education and financial planning:
Money management. Managing their monthly expenses to ensure they are not forced to take large distributions from their retirement nest eggs to meet current obligations.
Distribution planning. Planning distributions to ensure that they are not taking too much or too little from their retirement accounts, minimizing tax liability, and meeting Required Minimum Distribution amounts.
Continuing to accumulate assets. Now that retirees are living longer, their nest eggs must last longer. The old paradigm of becoming more conservative in retirement can sometimes backfire if retirees become too conservative and stop growing their assets. It is important to work very closely with your retired clients to make sure that they are continuing to grow their nest egg to at least keep pace with their distribution needs and to outpace inflation.
Protecting wealth. This is the area where retirees get the most attention–in the form of estate and insurance planning. However, they typically get their information from different sources and there is much inaccurate or misleading information as to how to set up wills, trusts, and charitable giving programs and what type of insurance policies are appropriate based on their personal circumstances. Also, insurance and estate planning tend to be viewed separately, when in reality both are tools to protect wealth and in some cases, to also minimize taxes. There is an opportunity here for planners who can approach wealth protection more holistically and focus on wealth protection plans and workshops designed to manage all aspects of preserving wealth from insuring against unforeseen circumstances to.
How to Reach Retirees
In terms of education strategies, we’ve found that in-person education is by far the best way to educate retirees. Workshops in particular are very popular among this age group, as they have the time and inclination to socialize in group settings and enjoy the company and camaraderie of other retirees.
Retirees also tend to be more receptive to ongoing, personalized financial planning sessions than employees in other age groups, as they have the maturity and life experience to know how important financial planning is to their daily lives.
Through a combination of workshops and financial planning sessions, you can reach a large number of people and make a strong impact on them individually as well. In the process, you will establish yourself as a resource for information and education that few others are providing.