Retirement: Are your solutions aligned with your clients' long- and short-term goals?

byRob Wick

Do pre-retirees constitute a bulk of your book or are you working with retired clients? Either way, what’s your formula and how do you address the three phases of retirement? This week, we introduce RETIREMENT, our second True G.R.I.T.TM essential.

Due to our current low interest rate environment, finding competitive returns on fixed income assets has become a challenge. This presents an opportunity for advisors to research and position alternative solutions. Otherwise, there will be a significant increase in funding costs which will negatively affect your clients’ retirement goals in the long run.

There are two white papers that should be on your radar: “Managing Risk with Fixed-Indexed Annuities” by Dr. Wade Pfau and “Fixed Indexed Annuities: Consider the Alternative” by Dr. Robert Ibbotson. Both papers address the low-rate environment and benefits of utilizing alternative asset classes, in lieu of traditional fixed income solutions. Alternative asset classes are extremely relevant to the three phases of retirement: Go-Go, Slow-Go, and No-Go.

The Go-Go Years: Also referred to as the “Honeymoon Phase,” this is a period in which your clients have a relative abundance of health and energy. Many will choose to travel, purchase the “dream” retirement home or they are checking off items from their bucket lists. While planning for this phase, are you discussing spending and sequence of returns on the distributions to fund the “adventures”?

The Slow-Go Years: While your clients retain the bulk of their mental facilities, their bodies have begun to slow down. The longer bucket list trips and adventures are less frequent and spending decreases on “adventures”. However, while spending on day-to-day slows down, healthcare expenses begin to pick up. During this phase, healthcare expenses tend to grow at a faster rate than any other costs. What strategies do you suggest when anticipating inflation during a period of increased costs?

The No-Go Years: If your client knows what planet they are on, they are in better shape than most! The final phase of retirement is where your clients can exhaust their estate the fastest. The need for 24/7 care, coupled with decreased mobility and health issues are in the spotlight. Your client must plan for any type of LTC coverage and methods for leaving a legacy. What is most important, possessing the assets to cover the client’s care or leaving assets behind?

Managing market volatility and sequence of returns is instrumental to any plan addressing the beginning phases of retirement. But regardless the phase, it’s important that you get your clients to consider the importance of life insurance prior to entering into retirement. Guarantees with predictable income streams require different solutions in low interest rate environments, which clearly need to be considered in any plan. Finally, having additional lines of insurance (IUL and LTC) become realistic and important topics for those in the later years.

Are you offering the right RETIREMENT solutions for your clients to match their short- and long-term goals? Call me at 866.866.7050 ext. 1105 for more tips to help your clients achieve their retirement dreams.

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