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Helping your clients prepare for the financial storm to come

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We tell people to prepare for winter storms. I remind my daughter to keep a flashlight and extra batteries in her apartment in case the power goes out. Whenever inclement weather is coming, I make sure she gets bottled water and charges her phone. These are simple things she can do to stay safe if something goes wrong.

We need help people prepare for retirement the same way they prepare for storms — because a financial storm is coming.

Americans are not saving enough. Even with the increase in the stock market over the last two years, the latest information shows very little improvement in retirement preparedness. The current average 401(k) balance is $63,929. But that number is deceiving because a few accounts have exceptionally large values.

In fact, 75 percent of 401(k) investors still have less than last year’s average 401(k) balance of $58,991. Nearly 40 percent of Americans begin their retirement with savings of $10,000 or less. 

Not only have people not saved enough, but they are living longer in retirement than ever before. Some retirees will require income in retirement for a longer period of time than they actually worked.

According to the Employee Benefit Research Institute (, a couple who makes it to age 65 together will have one spouse who has a 50 percent chance of living to age 90. That surviving spouse has a 25 percent chance of living to age 95. A single person at age 65 has a 50 percent chance of living to age 85.

Even if we use the best average account value of $63,000, how can someone live for 20 years in retirement on just Social Security and $63,000?

Inflation will eat away at that purchasing power. Even minor inflation can devastate people who are living on fixed incomes.

If the average inflation rate is 3 percent, a 65-year-old woman would need to double her income to have the same standard of living at age 89. And don’t dismiss the possibility of 7 percent inflation; after all, we averaged higher inflation from 1987 to 1990. Seven percent inflation for a decade would require twice as much income in only 10 years to maintain the standard of living.

The cost of health care

Health-care costs are going up, too, and many people underestimate them. Fidelity issues updates on these costs annually. In April or May, they provide estimates of the lifetime health-care costs retirees can expect to face. They exceed $200,000 per person and are increasing.

Currently, five million people suffer from Alzheimer’s in the US. That is one out of every eight retires. By 2050, that number will almost triple to 14 million or one out of every five retirees. Families can be overwhelmed by health-care costs involving Alzheimer’s or dementia, and those costs are often imposed for years. Where will we get the money to care for these people?

Americans’ quality of life will disintegrate rapidly if we don’t help them prepare for this storm. Fortunately, there are simple things people can do to make sure that they stay safe.

Ask your prospects and clients about these issues. Ask them how they want to live in retirement. Do they trust the government to come rescue them? Or are they willing to take small steps today to make sure that they can weather the storm?

You will have amazing conversations, and you will increase your sales, but more importantly, you will be making a difference.


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