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Retirement Planning > Spending in Retirement > Lifestyle Planning

Is Your Client Headed for a Reckless Retirement?

By Bryce Sanders

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What does “reckless” mean? Merriam Webster says “marked by a lack of proper caution, careless of consequences.” Unfortunately we know people who are taking a reckless attitude towards retirement.

Related: Social Security: 5 Common Misconceptions and Myths)

What are some clues that your client is avoiding the subject?

You might approach the topic of reckless behavior if you hear some of the following 10 statements.

1. The government will take care of me.

Social Security is mean to be a supplement to your retirement income, not the sole source. The government is more likely to find a way to consider it taxable income.

Instead: We need to do a retirement income projection and talk about your lifestyle in retirement.

2. My kids will see I’m provided for.

They have their own lives. Their own kids. It’s costing them everything they earn to educate, feed and clothe them. They are secretly hoping you will pay for their college tuition, not move in with them.

Instead: You want financial independence, not to be a burden to your children. Lets see what we can do.

3. If worse comes to worse, I’ll sell the house.

This might be a problem if your kids have moved back home. You will still need someplace to live. Retirement communities probably start at a couple of thousand or more per month. The house might have a home equity loan or an outstanding mortgage.

Instead: Downsizing might be an option, but lets start saving today so downsizing is the option of last resort.

4. I have plenty of time to plan.

Your client might be 45 or 55 years old. Time passes quickly. They should be putting away the maximum amount possible into their 401(k) at work and their IRA account.

Instead: Time flies. Remember when you started college? Four years seemed like forever. Looking back in senior year, you wonder where the time went. You should start saving, the earlier the better.

5. I’ve been at my firm for 25 years.

What could possibly go wrong? Loyalty isn’t valued like it was. During the pandemic lots of people were laid off, but not rehired. You can’t count on working until you choose to retire.

Instead: Look at the headlines during the pandemic. Many businesses have closed. Those workers didn’t choose to leave their jobs. Their jobs left them. (I can’t remember where I heard that one.) You need to look after your own future.

6. My IRA account is my play money.

Your client likes to trade online. They are at it night and day.

Instead: If you were to lose that money, how would you replace it?

7. I don’t see why my 401(k) at work is that important.

There are still some people who wouldn’t contribute to their 401(k) if they had the choice. They might be young.

Instead: Does your company do matching contributions? Why would you leave their money on the table?

8. I make my 401(k) contributions, but I keep the money in the money fund.

You want your money to grow in a tax deferred environment.

Instead: The stock market and interest rates operate in cycles. If you have a long time horizon, you should take advantage of those cycles.

9. Since I buy lots of lottery tickets, I’m bound to win someday.

Buying lottery tickets isn’t an investment. It’s gambling. After the drawing, losing tickets are basically worthless. There’s probably fine print at the bottom of ads telling the same message.

Instead: OK, buy one ticket, but put your money where it can work for you.

10. Thank goodness I can tap into these retirement funds during the pandemic.

Your client has been making ends meet today by borrowing from their retirement accounts.

Instead: If you’ve withdrawn money as a loan and don’t pay it back, the government will probably count that as a withdrawal, taxed as income. Leave that money alone. Try to find some elsewhere or reduce your expenses where possible.

You know reckless people. They need your help. They just might not know it yet.

— Related on ThinkAdvisor:

Bryce SandersBryce Sanders is president of Perceptive Business Solutions Inc. He provides high-net-worth client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor,” can be found on Amazon.

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