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MDRT INSIGHTS

Lifestyle is an Integral Part of Retirement Planning

Financial advisors are responsible for understanding what clients strive for financially before putting a plan in place. One tool that should not be overlooked is your client’s lifestyle plan. Having a lifestyle plan is an integral part of your client’s overall financial and retirement planning process. Lifestyle planning allows people to explore possibilities and identify outcomes that are typically beyond the scope offered by traditional financial services.

For example, when discussing retirement, clients should be empowered to take ownership of their nonworking years and the objectives they have in mind for that time of their lives. I have found clients are primarily concerned about when they will be able to retire and whether they will have enough money to last through their retirement years. Although these are valid concerns, we also should encourage clients to envision the lifestyle they want in retirement and how they plan to fund it. This technique can be highly successful in helping clients navigate the reality of their financial situation. They might have the resources needed to sustain their desired lifestyle but not the flexibility to use them.

Clients’ day-to-day mindset may or may not change, but what will certainly change is their ability to choose how to spend their days in retirement. That’s why it’s important to ask clients open-ended questions to discover what their purpose in retirement will be. Find out whether travel is in their plans or if they want to start playing golf or to spend more time with their grandchildren. See if they want to perform volunteer work, pick up a new hobby or revisit an old one, or perhaps just relax at home. With so many lifestyle choices, it’s wise for clients to have some idea of what they want their retirement to look like. The answers to these questions can mean very different things in the way a retirement is financed.

After you have a clear vision about the lifestyle your clients wish to live, you must analyze how that lifestyle will change as they age. Because people’s visions and desires change or expand, the horizon they originally seek is rarely ever reached. In many cases, clients’ retirement income requirements are not necessarily the same every year. Clients may need or want a higher income in their early years of retirement when they are healthy and more active than they will be in their later years. Ultimately, clients need to have a base of secure fixed income to ensure their survival in retirement, and they also need some flexible income in order to live comfortably. The proper mix of fixed and flexible income will be largely determined by your clients’ desired lifestyle and how that lifestyle will transition over time.

Having an entire retirement mapped out isn’t practical for your clients, but having a general idea of what their retirement will look like can make a huge difference in what recommendations you provide. If a client wants to know how long their retirement savings will last, you can calculate numbers based on typical assumptions. Those assumptions will give them an idea of how many years they can draw income or how much income they can afford to take each year. Ultimately, these recommendations, such as saving more, acquiring long-term care insurance and buying annuities, make more sense to clients because they have been an integral part of developing their plan. They will be more motivated to accept and act on your recommendations as a result.

Developing a lifestyle plan with your clients helps customize their overall financial plan. It gives a much more accurate picture of how well they can transition into their post-working years and what preparations may be required between now and then to ensure they can live their retirement as opposed to just surviving it. Retirement is not an ending but a new beginning. Some retirees have described that time of their lives as “a work in progress.” However, without discovering their lifestyle destination, they may never get to where they want. As with all aspects of financial planning, it is always better to have a map.

Nick Cassis, CFP, has been in the financial services industry for 16 years and is a 4-year member of the Million Dollar Round Table (MDRT). His company, Cassis & Associates Financial Services, is located in Dartmouth, Nova Scotia. Nick may be contacted at [email protected] .


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