Retirement Focus: Make your jack*

byRob Wick

Welcome to our second installment focusing on Retirement. This week, we continue the discussion on the shift or transition away from high risk/high earning potential to safety/less growth potential. In the initial installment True G.R.I.T.TM Weekly's Retirement focus, we shared thoughts on the psychological conversion your clients are going through:

“As your clients move into the senior market, there is more time behind them than on the horizon. As their advisor, you must help them recognize the hard truth that a portion of their portfolio must transition from investor to saver mentality. This transition will embrace the use of solutions like fixed-index annuities, cash value life insurance, fixed annuities, CDs and cash.”

While certainly a bold statement about the time horizon of your clients, it is extremely relative. Retirement plans should provide ample time for recovery from market losses, which can serve as a prime educational opportunity with your clients. For instance, walk through the following example with your clients:

They have $100. The market declines by 20%. They now have $80. What percentage increase do they need to get whole ($100)? Most will respond with “20%.” The answer is actually 25%.

With regards to your pre-retirees and retirees, the discussion around positioning a portion of their portfolio to safety becomes meaningful, as well. Can your clients afford to be fully vested in the market in the event we see a market scenario like 2008? And are you asking the hard question: If your retirement savings were cut in half, what impact will that have on your long term retirement goals?

The idea of capturing double-digit returns as you enter retirement puts your clients at risk. Theoretically, they have had plenty of time to participate in the market for large gains and growth potential. What they can no longer afford is to participate in downside risk. This is exactly why safety solutions were built - to allow your clients to participate in upside earnings while never putting their principle or gains at risk. Planning for retirement is not just about the right solutions but also to emphasize with your clients' psyche with regards to where they are today and where they would like to be in the future.

*Make your jack is a cowboy expression for "hit your target".