According to the AICPA PFP Trends Survey of CPA financial planners—many of whom work with high-net worth individuals—found that more than half (57 percent) of CPA financial planners cited running out of money as the top retirement concern for their clients.
This was followed by uncertainty on how much to withdraw from retirement accounts (14 percent) and healthcare costs (11 percent). The survey, which includes responses from 548 CPA financial planners, was conducted from February 3 to February 26. The Survey is administered as an online survey that targets CPAs who are members of the AICPA Personal Financial Planning Section, including those holding the CPA/PFS credential.
When asked about the top three sources of clients’ financial and emotional stress about outliving their money, planners said that healthcare costs (76 percent), market fluctuations (62 percent) and lifestyle expenses (52 percent) as the primary issues. Additional causes for financial stress were unexpected costs (47 percent), the possibility of being a financial burden on their loved ones (24 percent) and the desire to leave inheritance for children (22 percent).
“With all of the financial uncertainty surrounding retirement, running out of money is directly tied to a number of issues that high-net worth clients are juggling simultaneously,” stated Lyle K. Benson, chair of the AICPA’s PFP Executive Committee. “To help alleviate their clients’ longevity concerns, CPA financial planners integrate tax planning strategies to maximize income in retirement. This approach considers a client’s current situation and anticipates their lifestyle spending in retirement to ensure they stay on track in the event of an unexpected life event.”
The survey results showed that unexpected events are also having an impact on retirement planning for a large number of clients. These issues include long-term healthcare concerns (impacting 42 percent of clients), caring for aging relatives (28 percent), diminished capacity (26 percent), divorce (18 percent), job loss (18 percent) and adult children returning home (18 percent).
“The PFP Trends Survey found that the issues impacting retirement planning are constantly evolving, underscoring the need for a sophisticated financial plan that changes with a client’s situation,” said Jeannette Koger, AICPA vice president of Member Specialization and Credentialing in a statement. “The AICPA’s Personal Financial Planning Division is dedicated to offering our members tools and up-to-date guidance and resources so they can continue to meet the complex retirement needs of their clients.”
The following are some of the strategies planners are currently using with their high-net worth clients:
- Lifestyle helping clients understand the impact of their lifestyle spending and implementing a plan that balances their current income level and asset base with their retirement goals.
- Healthcare working with clients to understand their Medicare and insurance options so they can better plan for potential healthcare costs they might need to cover.
- Living situations identifying strategies, such as the use of continuing care retirement communities, to both control costs and save on taxes.
- Tax savings coordinating Roth conversions with IRA required minimum distributions, investing in assets with a lower tax rate, and maximizing Social Security income.
- Diversity mitigating the effect of market fluctuations with proper asset allocation, bucket strategies, and use of single premium annuities.
For more information on the survey, head to the AICPA's site here.