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We Can Do More for Near Retirees

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April has been a big month for the financial planning and advice industry, with both Financial Literacy Awareness Month and National Retirement Planning Week taking place and being recognized throughout the industry.

This is an ideal time to reflect on how we as an industry can better help advisors and their clients who are entering their golden years.

We’ve seen the numbers:

  • 10,000 Americans enter retirement each day.
  • A 65-year old couple has about a 50% chance that one will live to 95.
  • More than 1 in 2 people turning 65 will need some type of long-term care in their lifetime.
  • Just over half of consumers age 45 and older are working with a financial advisor.

But as an industry, what do we do with these numbers?

This month another number came out. Lincoln Financial Group launched a new Consumer Retirement Index in partnership with CivicScience, showing that only a quarter of working age Americans feel very confident about their retirement. Seems ominous, right? The index is measured by asking working-age Americans three questions: are they able to save enough to retire when they want, can they convert those savings into income that will last their lifetime, and do they have enough money to maintain their lifestyle in retirement?

(Related: It’s Never Too Late to Help a Retirement Planning Client)

Fortunately, not all hope is lost. Lincoln’s research on advisor satisfaction also found that investors who work with an advisor are more “fit” and engaged in planning their financial futures. These investors are more likely to have a financial plan, have greater familiarity with planning and investing, and a greater willingness to assume some level of risk to achieve better returns .

To me, this research signifies the critical role advisors play to not only provide clients with holistic advice and planning, but also education on various topics. I’ve always been an advocate for education — through forming consultative relationships with advisors to help solve for the needs their clients have and navigate the challenges that lie ahead. This approach helps clients understand the rationale, the problem-solving and the “why” behind the planning. I think education will ultimately ease their sense of worry and concern.

There are three planning topics that can resonate with clients who are feeling less confident about the future, and even underprepared. Starting with and refining these strategies can help set them on a path towards greater financial confidence — hopefully moving this new index in a more positive direction over time.

1. Maximize savings opportunities.

Saving for retirement would be easy if that was the only thing that people were saving for — but we all know that’s not the case.

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With student loans, everyday bills and other financial responsibilities fighting for share-of-wallet, advisors must help clients understand how to balance competing priorities.

This can also illustrate for clients how saving even just a little more now — by increasing their contribution to their 401k by 1%, or saving $5 a day instead of having that morning latte — can make a big difference when they’re ready to retire.

2. Turn savings into income.

When meeting with clients, it’s important to help them understand just how long their savings may need to last when they retire. A 30+ year retirement is a long time. Without a clear plan to help make their money last, I find they may be fearful about outliving their income and running out of savings.

You can help your clients feel more confident with a retirement income plan that addresses their concerns. For some, adding a source of protected monthly income can help increase their confidence — both by making their savings last and helping them to spend comfortably today. Help them to create a plan that can keep their savings growing while adding solutions like annuities that can offer a protected stream of monthly income for life.

3. Include protection for unanticipated events.

Most people turning 65 will need some form of long-term care in their lifetime, making long-term care an essential component of a thorough retirement plan.

Failure to plan can result in families making rushed and often expensive decisions.

For example, the national average for a private room in a nursing home is more than $100,000. Planning for a long-term care event before care is needed is recommended, ideally around age 50. Meaningful discussions should include both family members and a financial professional together to lay out care preferences, and assess care options and how they would realistically be paid for.

It’s common for clients to feel overwhelmed about the future. But by helping them focus on these three key areas — savings, protection and income — you are helping the 75% of Americans who aren’t feeling very confident about retirement shift to the other side of this spectrum, and to a retirement they are prepared for and well-equipped to sustain.

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John Kennedy is head of retirement solutions distribution at Lincoln Financial Distributors Inc.