NAIFA's Advisor Today Keyword(s)

 E-mail   Print  Share

Being There: the Five Phases of Retirement

It?s your job as an advisor to make sure that you are there?and active?during all these phases.

By Richard Dulisse, CLU, ChFC, CFP, CASL

Retirement is a moving target that defies a singular definition because it will be different for each client. However, planning for this event occurs continuously throughout the client?s financial life-cycle and usually has five phases. It?s your job as an advisor to make sure that you are there?and active?during all of these phases. Let?s take a look at each.

1. The savings phase: This starts as soon as possible after the client?s career begins. During that time, he will be preoccupied with other competing savings objectives, such as buying a home and dealing with family-building expenses. Your role is to motivate him to save for retirement, educating him about the importance of starting early. Establishing good retirement-savings habits despite the lure of short-term goals is essential to retirement security because of the miracle of compound interest.

During this period, a client may change jobs, and your role is to make sure that retirement savings are not cannibalized for other uses. Rollovers, tax-free transfers from one tax-qualified vehicle (an employer plan, for example) to another (an IRA, for example) can be a key service you provide.

2. The increased preparation and visualization phase: This phase cannot be identified with a particular age, but it involves your client kicking his retirement planning into high gear. Often, he sees his parents? retirement and realizes he wants to emulate the positive and not repeat the negative. In the ?increased-preparation? part of this phase, it?s your client who sees the need to increase 401(k) contributions or make paying off the house mortgage before retirement a priority. At this point, you should use retirement-income projections and expense calculators to identify the amount your client needs to save to fill the income gap during retirement.

In the ?visualization? part of this phase, your client becomes even more focused. Your client may begin to understand that limiting expenses can be just as important a goal as increasing savings. You might suggest that your client save all the raises that he earns in the five or six years prior to retirement. By putting those salary increases into a 401(k), Roth IRA or a traditional IRA, he will not only save more for retirement, he will also lock in spending habits and learn not to grow his lifestyle and budget?an important lesson for retirement.

You might suggest that your client save all the raises that he earns in the five or six years prior to retirement.

3. The decision phase: This phase is often characterized by the imminent event of retirement. The year before, the year of and the year after retirement bring many planning choices and challenges. A client may grow tired of his career, and may consider retiring because his children have completed college or he has received an inheritance, for example. On other occasion, age may drive the decision to retire. You should educate your client, however, that health and money are more accurate drivers of the retirement decision.

During the decision phase, you should counsel your client on a variety of issues such as pension distributions, when to start receiving Social Security retirement benefits and how to convert assets into retirement income.

4. The retirement transition and lifestyle phase: This phase follows immediately after retirement. It is often accompanied by increased spending on travel and other recreational pursuits and a focus on adapting to a changed environment. Travel, golf, gardening and volunteer work often occupy your client?s calendar.

Once your client has settled into retirement, you must help him adjust his spending accordingly. As time passes, the nature of the client?s environment also changes. Friends and family may die or move away. At this point, you may need to help him whether or not to move near family members or to a continuing-care retirement community. From a financial perspective, clients become more asset rich and income poor. You must be ready to help with the psychological and emotional needs that accompany these changes. The client-advisor relationship goes beyond financial solutions during the transition phase.

5. The frailty phase: Again, this phase does not depend on any specific age, but is marked by dealing with health issues, care-giving for a spouse and the loss of mobility. A client in this phase tends to become lonelier and more dependent on others. Proximity to medical services and community services becomes more important.

You can assist your client by directing him to the appropriate social services. It is also rewarding to know that your counsel has helped your client have sufficient resources during retirement. Financial independence can soften the loss of physical independence.

For more information on this topic, consider taking the LUTC/FSS course FA 261: Foundations of Retirement Planning through The American College.

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


See other articles about Retirement 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