4 Key Factors to Consider When Planning for Retirement – Advisor’s Edition

How many clients come to you, their financial advisor, and express concerns about retirement? Some fret over paying unexpected medical expenses. Others worry about having too much debt. Many simply worry, “Will I be able to save enough money?”

Helping clients retire happily and peacefully is one of the biggest challenges for any retirement planning advisor. It has them constantly researching new ways to make retirement easier for their clients. If you’re looking for fresh perspectives on retirement planning, keep reading for four key factors to consider.

What Are 4 Factors to Consider When Planning for Retirement?

1. Teaching the Importance of Retirement Planning

This one may seem obvious, but it’s also an easy place to fail as an advisor. You’ve likely put many clients through retirement, yet each client only goes through retirement once. They trust you to educate them and help them with making sound financial decisions. As you educate your client, you’ll find they bring new information to the table that can better direct your advice.

A recent Kitces article discusses various research showing that clients value advisors who communicate and explain concepts well. Consider offering retirement planning guidance in various formats, like videos, email campaigns, blogs, and brochures. Answer FAQs in these resources like “What are 4 reasons to plan for retirement?” and “Why is early retirement planning important?” And, of course, have regular check-ins to discuss how current financial news may affect your clients’ plans.

2. Anticipating the Retirement Spending Curve

The retirement spending curve (sometimes called the “retirement spending smile”) describes a studied retiree spending pattern. One might initially assume that retirees would maintain a steady standard of living, but multiple studies have shown that this is not the case.

David Blanchett, the head of retirement research for Morningstar’s Investment Management group, completed a study about estimating the true cost of retirement. The purpose of the study was to explore preconceived notions about funding retirement, which he describes as follows:

A common approach to estimating the total amount of savings required to fund retirement is to first apply a generic “replacement rate” to pre-retirement income, such as 80%, to get the desired retirement income needed. That need is then assumed to increase annually at the rate of inflation for the duration of retirement, which is generally assumed to be some fixed period, such as 30 years.

The data showed that replacement rates varied significantly depending on the household, ranging from under 54% to over 87%. Retiree spending does not grow on average by inflation or any other fixed percentage. The actual spending curve of a retiree family differs depending on total consumption and financing level, which you can see in the graphs below.

Source: “Estimating the True Cost of Retirement” by David Blanchett at Morningstar.

What does this mean for your clients’ retirement planning? By properly anticipating net worth and spending, your predictions can be more customized and likely even lower than amounts projected with more traditional models.

3. Using a Retirement Planning Worksheet

Worksheets are an excellent way to help clients stay organized and put their financial planning in digestible terms. It turns vague ideas of the future into something more concrete, allowing your clients to feel confident in their choices.

If you don’t have a standard worksheet you use for client retirement planning, you can create your own from scratch or find one through an online search. Essential items you should have on your worksheet include a breakdown of the following:

  • All retirement living expenses, which you can further divide by “essential” and “optional.”
  • Sources of lifetime income, like Social Security, annuities, pensions, etc.
  • Any savings or investments, like IRAs, savings accounts, CDs, 401(k) plans, or life insurance policies (which retirees can turn into cash via a  life settlement—more on that below).

4. Remembering to Suggest Life Settlements

Selling a life insurance policy (aka “life settlement”) is an often overlooked retirement solution. This is unfortunate, as retirees are missing out on extra cash they may need, and advisors are losing an opportunity to boost their reputation. A life settlement can pay around 20% of a policy’s face value, which is significantly more than surrender values that hover around 10% or less.

A life settlement is a solid retirement option for folks who:

  • No longer have dependents relying on them financially
  • Need the cash to cover unexpected expenses or emergencies
  • Want to reduce or get rid of their premium payments
  • Need to pay for medical expenses and long-term care

They must also meet the following requirements:

  • Be 65 or older
  • Have a life expectancy of 15 years or less
  • Have a sellable policy type
  • Have at least a $100,000 death benefit

If you have clients who meet these requirements, consider using Life Settlement Advisors. Our life settlement experts will efficiently guide you and your clients through the process. To help your retirees take advantage of a life settlement, start by going through our life settlement qualification calculator. This calculator will give you a good idea of how much your client’s life insurance policy may be worth.

Still have questions or want to learn more about life settlements in general? Get in touch by phone at 1-888-849-0887 or send us a message here.

Get in touch with Life Settlement Advisors today to take the first step toward converting your policy into cash.
Life Settlement Advisors
Leo LaGrotte
At Life Settlement Advisors, we strive to be a voice of confidence and assurance for our clients. Our goal is to educate you about the life settlement process so you can make an educated decision about whether it is right for you.