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Financial Planning > Tax Planning

Know your market: Retirees and pre-retirees

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The current generation of retirees and pre-retirees are facing challenges few groups in history have had to face.

Longer lifespans and costs of potential long-term care are increasing the possibility of outliving savings; market downturns during the Great Recession eroded nest eggs; and rising income taxes and social security taxes have put added stress on finances.

Furthermore, this generation views retirement differently than their parents and grandparents.

They expect to work beyond their early to mid-60s, yet want to enjoy a specific lifestyle during those years.

It’s evident retirees and pre-retirees need financial advice, and advisors need to develop truly comprehensive and individualized plans – understanding the many regulations in place that protect seniors from purchasing unsuitable products – to help them accumulate, distribute and protect wealth.

Engaging and Educating Your Clients

The key to engaging this generation is encouraging clients to embrace the concept of a detailed, multi-faceted financial plan through expertise, education and credibility.

Financial planning is not an investment-only proposition. It shouldn’t be all about the numbers. Most financial advisors get caught up in the management of investments and overlook the impact of critical areas of planning including estate planning,  tax reduction, budgeting, debt elimination and risk management (life insurance, long term care insurance).

Education on how to be financially independent is just as critical as the actual planning component. Advisors can help senior clients understand and apply financial concepts by teaching them how to have a working budget. Unlike a regular budget or a spending plan, which often contain projections and forecasts, a working budget shows what clients are actually spending. Clients should divide expenses into three major categories: Core expenses (food, housing, clothing, basic transportation, health care, insurance); pleasure expenses (travel, recreation, dining out); and, wealth transfer expenses (what do they want to leave heirs or charity). This also offers a reality check for those clients in denial about outliving their savings.

Building Confidence and Gaining Referrals

Advisors must believe in the planning process and take the time to do appropriate analyses and have reasonable assumptions for – and understand the impact of – income taxes, inflation, and rate of return based on the risk tolerance of each client. As professionals, advisors need to have confidence and show passion in the process in order for their clients to feel confident in their financial futures.

Most importantly, advisors need to ask questions and listen carefully to the answers to discover how they can help clients reach their financial hopes and dreams. When a client’s individual needs are put at the forefront of the strategy, advisors can provide truly comprehensive financial plans that fulfill clients’ specific goals and visions. They should focus on the client’s agenda instead of their own. By doing so, advisors are much more likely to receive referrals to qualified prospects than by implementing any other marketing strategy.