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Roadblocks to Retirement Savings

Help your clients avoid these eight obstacles to a secure retirement.

By Richard Dulisse, CLU, ChFC, CFP, CASL

Why don’t more Americans adequately plan for retirement? The answer lies in the many distractions that hinder retirement saving. Let’s take a look at the roadblocks to retirement-saving success and how you can help your clients overcome them.

Roadblock 1: The tendency to spend all income.
Perhaps the biggest roadblock to retirement saving for many working people is that they use their full after-tax income to support their current standard of living. These people will not have any private savings to supplement Social Security and pension funds. Many of them also may have experienced adversities like unemployment that pushed them into debt. In other cases, a lifestyle that incurs debt can stem from a spendthrift attitude or from the desire to emulate or improve upon their parents’ standard of living.

Whatever the reason for their lack of retirement savings, your clients must follow a budget that allows them to live within their means and also provides for retirement savings. You should assist them in the budgeting process whenever possible.

Roadblock 2: Unexpected expenses.
These include uninsured medical bills; repairs to a home, auto or major appliance; and periods of unemployment. Have your clients set up an emergency fund to handle these inevitable problems. Approximately three to six months’ income is usually set aside for this objective.

Roadblock 3: Inadequate insurance coverage.
Regardless of whether it is life, disability income, health, home or auto insurance, many individuals continue to remain uninsured or underinsured. Because your client cannot always recover economically from such losses, one important element of retirement planning is protection against catastrophic financial loss that would make future saving impossible.

You should conduct a thorough review of your clients’ insurance needs to make sure they are adequately covered. Two often-overlooked areas are disability income insurance and liability insurance for the professional.

Roadblock 4: Divorce.
Divorce often leaves one or both parties with little or no accumulation of pension benefits or other private sources of retirement income. They only have a short time to accumulate any retirement income and are not able to earn significant pension or Social Security benefits.

If the marriage lasted 10 years or longer, divorced persons are eligible for Social Security based on their former spouse’s earnings record. In addition, a spouse may be entitled to a portion of the former spouse’s retirement benefits if the divorce decree includes a qualified domestic relations order.

Focus on Retirement Objectives
This is a ranking of some typical retirement objectives according to a surveyed group of financial-planning practitioners regarding how they feel their clients would generally rate their retirement objectives.

Retirement Objectives in Order of Priority
  1. Maintaining preretirement standard of living
  2. Maintaining economic self-sufficiency
  3. Minimizing taxes
  4. Retiring early
  5. Adapting to noneconomic aspects of retirement
  6. Passing on wealth to others
  7. Improving lifestyle in retirement
  8. Caring for dependents

Roadblock 5: Lack of a retirement plan at the place of employment.
Some workers have never had the opportunity to participate in a qualified pension plan because their employer did not provide one. You should encourage these individuals to initiate a personally owned periodic disciplined savings plan. Ideally, an IRA would provide some income tax advantages and discourage spending it.

Roadblock 6: Workers who have frequently changed employers.
They face the problem of arriving at retirement with little or no pension. According to the most recent statistics available, six in 10 people who change jobs cashed out their retirement savings instead of rolling them over into another type of plan.

Advise clients who change jobs to roll over vested benefits into an IRA or their new qualified plan to preserve the tax-deferred growth on their retirement funds. For clients who have recently changed jobs, let them know that if they have not met the participation requirements of their new employer’s plan, then annual tax-deductible contributions can be made to an IRA in those years, regardless of their salary.

Roadblock 7: Lack of financial literacy.
Many employees have never been properly taught about investments and finance. For this reason, investment education has replaced health care as the top concern for employee-benefit professionals and employees. There is a window of opportunity to do seminar marketing by conducting educational workshops for employee groups.

Roadblock 8: The tendency to direct retirement funds for other accumulation purposes.
The down payment on a primary residence or a vacation home and the education of children can consume any long-term savings that people have managed to accumulate. Because these objectives have a greater immediate urgency for completion than retirement, they supplant retirement as a savings priority. Although these objectives are worthy, it is important to remind clients that savings must be consistently carved out for retirement purposes in addition to other long-term objectives.

Stress its importance
Whatever distractions your clients face, it is important to educate them about the need to plan and save for retirement. Clients must realize that saving is possible only for a limited time during their life, but consumption occurs throughout their lives and can drastically increase at any time because of illness or inflation.

It is essential for clients to save sufficient assets during the working years to ensure attainment of retirement goals. By living below their means before retirement, clients can establish a lifestyle that is more easily maintained later on. You can motivate clients to undertake a savings plan by first helping them identify their retirement objectives.

Richard Dulisse, CLU, ChFC, CFP, CASL, a member of NAIFA-Greater Philadelphia, is an LUTC author and editor, and assistant professor of financial planning at The American College. Contact him at


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