Identify the Income Gap to Help Clients Plan for Retirement
- By Julie Stewart
- November 11, 2015
Baby Boomers should have at least $1 million of investable assets to generate adequate income for the duration of their life expectancy, according to a report by the Insured Retirement Institute. Note, that figure doesn’t even include Social Security benefits.
Are your clients ready for retirement?##
In order to effectively assist your clients in designing a retirement plan that allows for income they cannot outlive, we must first identify the income gap. This is the space between what they are currently bringing in and what their projected expenses look like.
An important question to ask: How much income do your clients feel they need to live comfortably throughout retirement? Are they falling short? If so, they will need to change the way they think about retirement planning.
Here’s how you can help. ## Take a comprehensive approach## In order to effectively plan for an income gap, advisors must look at all avenues and sources of income including Social Security, pension plans, retirement accounts, savings, perhaps even real estate investments before you begin planning.
The idea is to ensure that your plan fills the gap while also leaving enough cash on hand just in case life happens. Emergencies and unexpected expenses will always come up and the difference between a good plan and a great plan is looking at the big picture.
Here are a few strategies to recommend if there is a gap between their current pace and future goals: ### Spend less, save (and invest) more### Small increases in savings rates can make a big difference over time. Also, Boomers 50 and older can make “catch up contributions” of $6,000 per year towards their workplace retirement plans. ### Get money off the sidelines### A fixed rate product like an annuity is an effective way to better utilize cash that isn’t earning much. Also, consider reallocating assets into more aggressive investments. ### Delay retirement a few years### This has a dual benefit. For one, they’ll have a few more years to accrue capital. Secondly, by delaying Social Security to just age 66, payments increase by 32%.
Make sure that when your clients are finally ready to retire, they will be in a better position because of the plan you helped put in place.
Learn how we make it easy for agents to help their clients retire comfortably.