By Donald Ray Haas

Previously in this column, we explored how much money your clients will need in order to maintain their pre-retirement standard of living. Now it's time to discuss specific sources of retirement income for those golden years.

But first, a brief history lesson. In the 20th century, Americans' retirement income sources came full circle-from self-reliance to government/employer dependence and then again to self-reliance. For example, in the early 1900s, Americans were almost totally self-reliant. The pattern then was you worked until you died. Perhaps there were a few years you depended on your children who worked the farm, but it was still "your farm."

In the thirties, the government established public work programs and Social Security benefits. Three decades later, employers joined the fray by offering medical and pension benefits. By the end of the 20th century, however, many Americans were to being more self-reliant and less dependent on companies and the government to fund their retirement years. In fact, many traditional pension plans funded entirely by employers have been replaced with employee-contribution plans like the popular 401(k) and 403(b) plans.

In other words, despite our 21st century market economy that is driven by technology and other nonagrarian industries, you still own your "farm" and control how you'll live after you stop working.

Provide this vital information to your clients. Stress to them the fact that they can no longer rely on their employer or the government but must be self-reliant.

While it's true that some employers match employee contributions or contribute a low percentage to defined-contribution plans and that Social Security may continue to provide a small portion of retirement income, the combination of these two sources of income is probably not enough for your clients to live comfortably.

Baby Boomers hold the key
So, where are we today, and where will we be in the next few decades? A 1999 survey conducted by the AARP revealed this about the future of retirement income: "The old three-legged stool of retirement income-government, employer, and self-is being replaced by a more solid, four-legged stool: the traditional three, plus work. Once they retire, 80 percent of the Baby Boomers surveyed said they plan to continue working in some way."

Clearly, our culture has redefined retirement and it no longer means stopping work. Today, especially for Baby Boomers, retirement means doing what you want to do-including working-to one degree or the other. Here's how the 1999 AARP survey respondents expected to allocate their time to work/nonwork activities:

Given today's longer life expectancies and frequent medical breakthroughs, Baby Boomers may need to finance 20, 30, or even 40 years of retirement. For many, the only recourse may be work-either by delaying their retirement age or seeking part-time jobs to supplement their income.

As trusted financial advisors, listen carefully to your clients' retirement dreams and expectations. Show them the reality of not saving enough-many Boomers already know that they are not saving enough. Then, develop a reasonable retirement plan to help them get there.

Building your own nest egg
In the financial-services industry, renewals and trail commissions have provided significant cash flow or a "quasi pension" for some insurance agents and registered representatives. Once lucrative, income sources are drying up as more clients discontinue their insurance coverage and investment plans and accounts are moved to a different broker-dealer. These days, it's common practice for issuing companies to modify their contracts. And, who knows what the future will bring? If you must count on this potential cash flow, be cautious and proactively seek alternative ways to achieve self-reliance.

It is possible to enter into an agreement to transfer your book of business to someone else to service it and pay you a percentage. Also, an agreement with your broker-dealer prior to termination can provide a continuing trail of compensation. Explore your options thoroughly and plan just as carefully as you do for your clients.

Next month's column will explore retirement asset allocation and show how to properly transition a retirement portfolio from equity to fixed-dollar investments.

Donald Ray Haas, CLU, ChFC, CFP, MSFS, of Southfield, Mich., has been an insurance agent and financial consultant for 45 years. He can be reached at 248-213-0101 or at Donaldhaas@aol.com.

Donald Haas’s series: Retirement Planning

Profiting from Retirement Planning (June 2001)

How to Make Retirement Money Last (July 2001)

Assessing Retirement Income (August 2001)

Redefining Retirement (September 2001)

Making Clients’ Money Last (October 2001)

Making the Most of Your Client’s Money (November 2001)

Managing Goldmines (December 2001)

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