NAIFA's Advisor Today Keyword(s)

 E-mail   Print  Share

Critical Questions for Planning

The issues every advisor should cover when drafting a financial plan.

By James P. Ruth

For clients who are interested in financial-planning services, the rewards are clear: a successful retirement and being able to do what they want, when they want, until the end of their lives. However, the penalties for procrastination and miscalculation are cruel, daily financial compromises and diminished lifestyles. To get clients to realize the importance of planning, discuss some of these basic issues and questions before drafting financial plans.

Human nature
Humans are natural consumers, not savers. They must be offered incentives to save and then given the tools and encouragement to invest for the future. Consider the following:

  • How much should your clients save?
  • What investment options should they choose?
  • Are their goals and expectations realistic?

Many people hope to have their mortgage paid off by the time they retire, but this is not always realistic. Before you make a decision on the mortgage with your clients, find out the following:

  • Could it make sense to have an affordable mortgage during retirement?
  • With continued low interest rates, could retirees earn more on invested home equity than they pay in mortgage interest?
  • Will they need the tax deduction that goes with a mortgage when they retire?

Asset allocation
The mix of investments needed for retirement changes depending on clients’ goals, risk tolerance, health, family circumstances and other factors. When allocating their assets, be sure to address these questions:

  • Should investors maintain the same asset allocation throughout retirement, or should it vary as they age?
  • Should their portfolios be rebalanced periodically?
  • What percentage should be in stocks, bonds or mutual funds?

Pension plans
Many private employers do not offer pension plans anymore, but if a pension is in place, you must address the following questions:

  • Which irrevocable retirement-income option should be selected: single life, annuity, joint and survivor, or something else?
  • Should life insurance be considered as a way to maximize pension benefits?

Retirement income
Americans are routinely living into their late 80s, and many want to retire before 65. Be sure to ask your clients the tough questions to realize the importance of planning:

  • How much income will it take for them to retire comfortably?
  • How much income will it take to maintain their standard of living?
  • In which order do they plan to spend their accumulated assets to fund their retirement?

Reverse-equity mortgage
While often overlooked by retirees, reverse-equity mortgages can allow clients to live their remaining years in their own homes with an additional stream of income. Find out if this is right for your clients and explore the following:

  • How much income could they receive?
  • What will it take to set up a reverse equity mortgage—will you need assistance from outside counsel or advisors?

These tips were taken from the article “The Value of Advisors” by James P. Ruth, CFP, which originally appeared in the February 2002 issue of Advisor Today.


See other articles about Financial Planning

Conference Newsletter

Contact Us   |   Reprint Permission   |   Advertise   |   Legal Notices   |   Join NAIFA   |   Copyright © Advisor Today 1999-2017. All rights reserved.

AT Blog
Product Resource
Digital Magazine