Imagine you’re planning a round-the-world cruise.
It won’t happen for a few years but you’re serious about going. One of the first things you do is figure out the cost. As the date draws closer, you nail down the exact amount of money you’ll need.
Now, imagine you’re a client who’s planning to retire, someday. Wouldn’t you do the same thing? Figure out how long it will last and exactly what it will take to keep you afloat during your retirement journey?
The truth is: Most Americans don’t. Even your clients might not make a serious effort to do such a thing, unless you insist.
What Your Peers Are Reading
In fact, in a recent survey covered by U.S. News & World Report, only 14% of pre-retirees knew what their Social Security payments were likely to be at retirement. That level of ignorance is scary.
Social Security benefits were never meant to be your clients’ only source of income in retirement. If your clients understand their benefits, that will help them plan confidently for retirement. And we know that having a plan is one of the key behaviors in achieving financial and emotional confidence.
Whether your clients will be trying to meet their needs with mutual funds, life insurance, annuities, or cash in a coffee can, they still should go through the same kind of planning process.
Helping clients be strategic about their overall retirement income plan is one way to make them more financially and emotionally confident.
The 75% rule.
Your clients need about 75% of their pre-retirement earnings to live comfortably in retirement.
If your client earns $76,000 a year, for example, the client will need retirement income of $57,000.
Social Security will only cover part; about $32,000 a year will have to come from other sources.
And, even though the 75% rule may be a ‘rule of thumb,’ it may not be realistic. A team at the Society of Actuaries predicts that typical retirees will spend 100% of pre-retirement income during their first 10 years in retirement.
Tips for Clients
So, what do you tell your clients?