People often have many questions about retirement and saving for their golden years. Many, however, will never ask these questions, even if they have a financial advisor helping them with their retirement accounts and savings, and they have a vested interest in the answers. Financial advisors can add value to their client relationships by answering the following questions that people may not be voicing, but are almost certainly thinking about.
1) Can I realistically spend less in retirement?
Statistics are in the client’s favor, it seems. Every year, the United States Census Bureau compiles the Consumer Expenditure Survey and, with the exception of rising healthcare costs, the data shows that average spending in every other category drops significantly in retirement. However, it’s important to advise clients to expect an increase in pleasure expenditures (travel, entertainment) during the early days of retirement. These initial increases need to be taken into consideration, but overall the day-to-day expenses of retirement will likely be lower than during the working years.
2) Is long-term care insurance worth it?
This is a question specific to a client’s situation. There is no “one size fits all’ strategy concerning long-term care insurance. This product is often so expensive that many clients can’t afford it and those that can are likely able to pay for care when they need it.
In between either one of these extremes are those with net assets totaling between $300,000 and $600,000. For these clients, the decision boils down to their individual health history as well as their family situation. Will there be a close family member willing and able to assist?
It’s also important to help clients do their homework on these products if they do opt to purchase long-term care insurance. These policies are typically extremely complex and difficult to understand. They often include language and loopholes limiting what they will cover.
3) Is carrying life insurance important post-retirement?
This is another area of discussion where the answer depends on the client’s finances. Some elect to drop these policies when facing rising premiums while others continue to pay for policies that cover final expenses or funeral costs.
Advisors should also remind clients to cancel disability insurance policies since most policies for disability are designed to replace income if the client is hurt and can no longer work.
4) What other medical insurance do I need?
The majority of Americans are entitled to receive Medicare Part A. Part B covers some fees and expenses that are not handled by Part A and is a favorite add-on among retirees. Given the rising costs of medical care, clients may want to look into a Medi-gap insurance policy as well to cover the well-publicized gap between coverage for Part A and Part B.
5) Should I work in Retirement?
Working part time is a fantastic way for retiring clients to pad their retirement income. Staying on the job even five years longer will enable the average retiree to increase their annual spending 56%, per The Urban Institute.
Even better news? Under the current regulations, clients can earn up to $15,720 working part-time while they draw from Social Security without tax repercussions. There’s also a very real benefit to seniors who remain in the workforce. Research shows that retirees who stay in the workforce into their 70s report fewer health problems.
Getting clients to overcome their fears of asking questions can be one of the most difficult tasks facing a financial advisor. However, being able to provide at least some answers to common questions, like those above, can be a great lubricant to grease the wheels of continuing dialogue. Once a client’s initial fears are overcome, oftentimes, they are then able to more readily, and successfully, deal with the actual issues of preparing for, and executing, a solid retirement strategy. But getting over the first hurdle is a must in order to get the vehicle rolling downhill.