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Planning for Retirement

This task no longer ends when your clients stop working.

By Shelley Kostrunek, CMFC, CRPC, CLTC, ChFC

As millions of Americans retire, they move from a period of asset accumulation to one of distribution planning. The impact of this shift cannot be overestimated because this generation represents a significant portion of the current and future book of most advisors’ business. Born between 1946 and 1964, this group will need to plan for a retirement that could last over 30 years. So, it’s not only those close to retirement, but an entire generation as well that needs your help ensuring their portfolios will provide a lifetime of income.

Several risks can undermine the success of your clients’ retirement-income plans. These include longevity, inflation, asset allocation, withdrawal rate and health-care expenses.

Underestimating risk
Many people underestimate their life expectancy and risk outliving their assets. A successful lifetime-income plan helps your clients prepare for living well into their 90s. There is a very real possibility that clients will live 20, 30 or even 40 years in retirement. The anticipated longer retirements and the impact of inflation make it critical for their portfolios to include investments with the potential to outpace inflation. It’s also important to provide protection for that income for the surviving spouse, or long-term care needs for an unhealthy partner.

Many retirees think they need a conservative portfolio, but given the anticipated length of their retirement, this thinking could increase the risk of outliving their assets. A key to long-term success may lie in balancing portfolio income with portfolio growth. Obviously, a conservative withdrawal rate would dramatically increase the likelihood of retirees’ not outliving their assets. You need to help your clients understand how much they need to save to meet their lifestyle goals and what a realistic withdrawal rate is. Rising health-care costs, coupled with inadequate medical insurance coverage, can have a devastating effect on a lifetime-income plan. Addressing this risk may mean targeting savings specifically for health care and purchasing long-term care insurance (LTCI).

Sporty 40s
In approaching prospects, we can divide them into age groups. Let’s consider the first group as being between the ages of 42 and 49. They are too busy to think much about retirement planning. They have multiple financial goals, including college savings, retirement and housing costs.

The important risks to discuss are longevity and asset allocation. People in this group need to understand the value of extra years of compounding on their savings and should be coached on having a growth-oriented portfolio to take advantage of long-term equity performance. Some opening questions to ask are:

  • What events could derail your current retirement-savings plan?
  • Has market volatility affected your savings?
  • Will you be paying college tuition for your children?
  • How would you prioritize your financial goals?

Possible solutions to these issues are risk tolerance and subsequent proper asset allocation, college-savings planning, health insurance, life insurance, disability income (DI) insurance and deferred variable annuities (VAs).

Nifty 50s
The next segment consists of clients aged 50-59. They are now beginning to think about retirement and are not sure if they have saved enough. They don’t know how to put together a retirement-income estimate and are concerned about life’s changes, such as aging and their kids leaving home.

You should be discussing longevity, the appropriate strategy for growth until retirement age and how they will meet their needs during a long retirement. They should be looking at transitioning their asset-allocation plans to take advantage of the next five to 15 years before retirement.

Now is the time to discuss life and health insurance coverage in retirement, including obtaining LTCI, discontinuing DI insurance and the options for supplemental health-insurance coverage at retirement. Questions to spark a discussion include:

  • Do you know that at age 65, one of you has a 50 percent chance of living to age 92 and a 25 percent chance of living to age 97? (Use when addressing a couple.)
  • Do you know how much you will be spending in retirement?
  • How is your long-term portfolio holding up?
  • Do you feel comfortable about your retirement-savings plan?

Possible solutions include having an asset-allocation review, taking advantage of catch-up provisions in their IRAs and employer-sponsored plans, consolidating of assets for more efficient management, and using fixed annuities or VAs. Now might be a good time to discuss living-benefit riders on VAs.

Swinging 60s
Finally, for your clients age 60-69, their key concerns might be wondering if they have saved enough for retirement, their health prospects and worrying about taking care of their children and grandchildren financially.

Items to discuss include planning for the possibility they will live longer than expected, an asset-allocation review, health-care coverage and the risk of inflation eroding their spending power. Questions to spark a discussion include:

  • Can I help you determine how much you can expect to receive from Social Security or your pension?
  • Would you like to help fund your grandchildren’s education?
  • Have you thought of protecting your spouse or partner if something were to happen to you?
  • Can we discuss the retirement-income potential of your portfolio?

Possible solutions to these issues include asset allocation and diversification, catch-up provisions for IRAs and employer-sponsored plans, consolidation of assets for more efficient management, assessment of their life insurance coverage, LTCI needs or annuity laddering. They may also want to consider conversion to a Roth IRA. Additional considerations might be:

  • checking beneficiary designations for all accounts
  • discussing required minimum distribution options
  • implementing a health-care power of attorney or living will
  • using systematic-withdrawal plans
  • considering estate planning

The transition from full-time work and asset accumulation to retirement and asset drawdown brings on a new set of financial decisions. The main challenge—achieving potential lifetime income solutions—is serious.

Educating your clients and prospects to understand and adequately plan for their retirement security requires an immense effort by the industry, employers, the media and the government. Understand the issues and position yourself to discuss each set of issues at the appropriate time. Engage your clients in the process and show them the solutions to the issues and you will retain them. Best of all, you will have provided them with great value that will last a lifetime.

Shelley Kostrunek, CMFC, CRPC, CLTC, ChFC, is a senior investment products consultant in Mutual of Omaha’s advanced markets and holds several securities licenses. She serves on NAIFA-Omaha’s Board of Directors and Industry Relations Committee. Contact her at

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