[IMGCAP(1)]There are two parts to guiding your clients into and through their retirement years: the money and financial part, and the personal part. Most come seeking advice because of the money issues, but the personal part of how a client will spend their new free time is just as important.

We’ve all heard stories of people who have worked hard their entire life, only to retire and then pass away shortly thereafter. I can’t say that there is a connection between inactivity and mortality, but I do believe that retiring without a plan for how you are going to use your 168 hours per week is not wise.

When we look at life after work, there is a huge time void that needs to be filled. You may be surprised to learn that many of your clients have never thought freely about their dreams and vision for the future. As these visions begin to formulate, you as the planner must continue to probe and learn what is most important to your clients. For some, this process is so difficult that you may have to ignite the thinking part with a provocative question or two. One of my favorites is to ask a client if they passed away tomorrow, whether they would have any regrets, or wish they’d done or become something that has not yet materialized for them.

Questions like that will lead a client to answer with thoughts such as, “I wish that I had visited my elderly mother more frequently,” or “I’d like to take my grandchildren skiing more often.” This may sound simple, but what is most important on the qualitative side is to help a client discover the most rewarding way to utilize their 168 hours per week. As this issue becomes clear, the planner can use their technical knowledge to assess the feasibility of the goals and have recommendations in all areas of their financial life to guide those visions toward reality.

Just as some clients have a hard time figuring this out, others will have their time fully mapped out. They’ll have dreams, lists and ideas of what they’d like their retirement to look like in vivid detail. These clients may also need financial guidance. Perhaps the first part is whether they can afford the desired lifestyle. If not, then your first actions need to be direct and helpful, such as letting them know how much they can afford to spend and how to prioritize, or by letting them know that they’ll need to work and save a few more years or downsize their vision.



Regardless of how early your client starts the process with respect to retirement planning, the planning for the client’s ideal future can start as soon as they can articulate their vision. Once the vision is established and can be quantified, the advisor can begin to work on the analytical side. For clients, or advisors for that matter, who are not comfortable talking about the softer and deeper side of life planning, you are missing an opportunity to strengthen a relationship and offer help beyond the numbers. Of course, a plan can still be done that includes forecasts and future additional spending if needed.

All retirement guidance must begin with a forecast of cash flows. Your clients should understand their cost of living and their desired level of spending, today and in the future. For those early in the process, you’ll be able to help them determine if their level of savings is appropriate for their end destination. Be careful with your assumptions here and make sure that the actual results are compared to the forecast fairly frequently. Not accounting for deviations from forecasts year after year can cause a negative surprise when you finally revisit the numbers.

For example, if a client tells you that they spend $10,000 a month on basic living expenses, you can use that in your forecasting. But if it turns out that they really spend $12,500 per month and your forecasts don’t reflect that, you may be causing future problems from a lower savings rate and underestimating their future income needs.

Just about any assumption made in the planning process, such as rate of return and inflation, also needs to be reconsidered as conditions dictate. Understating inflation or overstating the forecast rate of return could have devastating impact on your clients’ actual ability to draw income in years to come. Consider a few ways to mitigate the possibility of an adverse forecast. First is to use a range of assumptions, such as 3 percent to 6 percent inflation and 2 percent to 6 percent for rate of return. Another is to keep the intervals of forecast updating short, with a restating of assumptions as needed. Intervals such as annually or every other year are OK for those at a distance from retirement. But for a client whose retirement is closer, I’d update your forecasts at least annually.

Teach your clients how to check up on their Social Security records. Many people don’t realize that they’re not going to get the annual Social Security statement in the mail anymore and have not yet established an account online with the Social Security Administration. While the records shown on most Social Security earning records are accurate, there are sometimes mistakes. Help your client to validate their records to ensure that they are lined up to receive their maximum benefit.

In addition to the forecasting side, your clients should undertake a comprehensive risk review to answer the question of what can happen to render the forecast completely wrong. Of course, there are issues such as sickness or premature death. But one must also factor in the possibility of extended periods of unemployment, underemployment or a catastrophic loss that creates large uninsured claims.



As your clients get closer to their actual retirement date, help them think about the loss of benefits from work and what options they have for replacing them. This can be a tougher issue than many think if the client is too young for Medicare coverage, and may materially impact your forecasts due to the high cost of individual health plans. The loss of other benefits such as life and disability insurance should not be an issue in retirement for most clients.

Find out about all of your client’s retirement savings, including deferred compensation, ESOP plans and anything else that may trigger the need for distributions upon separation from service. To the extent that you have options on payouts, help your client plan so that the tax impact can be minimized. Items that can cause a large chunk of ordinary income upon retirement may be unused sick days, deferred compensation programs or bonuses. For example, if you have a high-bracket taxpayer with deferred compensation or sick days accumulated who wants to retire at the end of the year, ask them to consider January. This way they will have very little base compensation in the year of retirement and leave more room in lower tax brackets for the larger lump sums coming from the deferred compensation or sick day payment.

You can help review their options for taking Social Security. Even clients with a high level of wealth welcome this discussion. The only problem with this discussion is that it is impossible to be completely accurate with your answer. You can guide them through the generalities of Social Security income using their specific facts such as benefits, age and life expectancy estimates. But they are just that — estimates where the actual outcomes are dependent on other factors such as earnings and date of death.

It would also be wise to be sure that your client’s estate plan is current. Not only the documents such as wills, durable powers of attorney and health care directives, but making sure that their assets are owned properly and that beneficiary elections are current and intentional. For example, it doesn’t help your client who has trusts set up to also have joint ownership of all of their property. Yes, the client can take advantage of portability for death tax purposes, but why make it so difficult and time-consuming when merely owning the assets in the trusts while they are alive can accomplish the same thing with little fuss?

This is also a good time to have a conversation with clients about their children and any special situations that you should be made aware of. Perhaps your client is concerned about the durability of a marriage, and wants to be sure that the maximum protection is given to their marital assets so that a child can possibly protect herself from a nasty divorce after the passing of both parents. You want the documents to reflect the reality of the client’s situation, with provisions to facilitate their final wishes efficiently and cost-effectively.

As you guide your clients through retirement, there are other issues that will become important. Perhaps a stress test of their cash flow under the duress of a long-term illness is appropriate. Long-term-care insurance is not the answer for everyone. Some can’t afford it, others can’t qualify for it, and then others simply don’t want to buy insurance for something they may never use.

You should also develop a sense of what their family support network looks like. It will be different for the family whose adult children are scattered around the country than for those whose children live nearby.

Over the years, I’ve found that many clients are very private about their financial affairs — so private that even their children who have significant roles ahead with their parent’s estate administration or health care powers of attorneys don’t know their role. I believe that one of the greatest services that a financial planner can provide is guidance on the communication needed to clarify the parent’s plans to the next generation or those who will be tasked with the settling and distribution part. Be pro-active, and help your client get what they need for their pre- and post-retirement needs and help them communicate that information to their caring and concerned (hopefully) next generation. 

John P. Napolitano CFP, CPA, is CEO of U. S. Wealth Management in Braintree, Mass. Reach him through JohnPNapolitano on LinkedIn or (781) 884-2390.

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