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A Formal Plan: Advisor Priority and Client Confidence Booster

Retirement may be near for many pre-retirees, but a majority of them do not feel very confident about what comes next.

A recent LIMRA Secure Retirement Institute study, “Dear Advisor…,” shows half of pre-retiree households feel only somewhat prepared for retirement. This feeling also is pronounced among a large portion of households with moderate income ($50,000 to $75,000) or moderate assets ($500,000 to $999,999). Only three in 10 pre-retirees say they are well-prepared for retirement.


A Real Confidence Booster

One factor emerges as a real confidence booster: It’s not income or assets, or whether a pre-retiree works with an advisor, but rather having a formal, written retirement income plan. Nearly seven in 10 pre-retirees (67 percent) who have a formal plan said they felt well prepared, compared with just a third (34 percent) of those people who did not have one (see chart).

Even among affluent households with financial assets of $500,000 or more — who tend to have greater investment knowledge — eight in 10 with a formal plan felt well prepared, versus five in 10 without a plan.


A Formal Plan Matches Reality With Expectations

A formal, written retirement income plan allows pre-retirees to put on record their retirement goals, match their expectations with reality, and trade off choices and needs. The plan explains, among other things, the best age to claim Social Security benefits; how much of expenses, including health and long-term care costs, to cover with guaranteed or predictable income; and how to take withdrawals from different accounts to save on taxes.

Having a realistic picture supported by tangible numbers — on what they can afford and how to generate enough income in retirement to maintain their lifestyle — gives pre-retirees an important boost in confidence.

However, these formal, written plans are not as prevalent as they should be. LIMRA SRI research finds:


» Only 10 percent of all pre-retirees have completed a formal plan.


» Less than 40 percent of pre-retiree households working with an advisor have completed a formal plan. The others have either no plan or rely on an informal one.


A Formal Plan Should Be the Advisor’s Priority

Formal retirement income planning provides a real opportunity for advisors. Seven in 10 clients buy additional insurance, annuity and investment products recommended in a plan. Prior LIMRA research also shows a distinct connection between advisors’ engagement with clients’ retirement income planning and high client satisfaction, loyalty and degree of asset consolidation with the advisor. 

Nearly a quarter of high-net-worth clients with a plan have consolidated more than 90 percent of their portfolio with their advisor. That percentage is three times higher than for those who do not have a plan. Moreover, once settled with an advisor or an institution, retirees tend not to move assets, and as a result their assets become sticky. This is a win-win proposition.


Jafor Iqbal is assistant vice president, LIMRA Secure Retirement Institute. Jafor may be contacted at [email protected]

Jafor Iqbal is associate managing director, retirement research, for LIMRA Secure Retirement Institute. In this role, he is responsible for managing retirement income research projects. Jafor may be contacted at [email protected] .

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