3 Tips for Preparing Clients to Spend Their Retirement Savings

Approximately 10,000 baby boomers will turn 65 today, and every day for the next 11 years. This Pew Research Center statistic drives home the importance of ensuring your baby boomer clients are prepared for retirement.

Ideally, your boomer clients should be crystal-clear about how their savings will be utilized to fund their lifestyles during retirement before they turn 65, not afterward. Your clients shouldn’t have to be the ones to call you to ask, “I’m ready to retire. What do I have to do to start the flow of retirement income?”

Retirement doesn’t just involve giving up work — it requires people to change the routines, schedules, priorities and daily personal interactions they’ve had for years, or even decades. It can also involve moving to different homes and communities altogether. In other words, retirement is a huge lifecycle event.

To make the adjustment easier, advisors should discuss decumulation — the process of actually deploying the retirement savings that clients have accumulated while they were working — at the start of each client relationship, or at least five to 10 years before clients are ready to take the plunge into retirement.

Below are some tips for how advisors can prepare clients for decumulation:

1. Incorporate decumulation into long-term financial plans: One way to begin the conversation about decumulation, and help clients understand the process, is to include a section in long-term plans about how the assets mentioned in those documents can be converted into income during retirement. This type of section in long-term financial plans should offer a comprehensive step-by-step timeline for when clients will begin to receive income from 401(k) savings accounts, real estate investments, diversified investment portfolios, and other assets if they decide to retire at age 65. Advisors can also take the initiative and leave 10 to 15 minutes of any client meeting to discuss decumulation in more detail.

2. Make sure couples are on the same page: Before a client’s nest egg can be put to the use it was accumulated for, both the clients making up a couple have to know and agree on the type of lifestyle they want to live, and fund, after they retire. It’s not uncommon for couples to discuss their retirement plans one time and assume they are on the same page going forward. With time, dreams and plans can change — particularly with the introduction of grandchildren, social status changes or other life milestones. Regular discussion about retirement plans is necessary in order to ensure that there are no surprises when retirement is becoming a reality. Many decumulation plans and discussions the client has had with their advisor can come crashing down as soon as they retire if advisors are not helping facilitate this conversation on a regular basis.

To avoid this type of situation, advisors should make an effort to nurture their client relationships and encourage clients to attend meetings as a couple, when applicable, in order to discuss retirement planning and decumulation.