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Financial advisor speaks with his mature clients while reviewing their retirement documents.
Retirement Planning

How to help your clients plan for all 3 phases of retirement

Are you looking for ways to help your clients focus on the long term when it comes to retirement planning?

Retirement lasts much longer today than it did even a few decades ago. People spending 20 or even 30 years in retirement is not uncommon, yet many of your clients aren’t thinking about how they need to budget their retirement savings to go the distance.

Have you thought about suggesting that your clients view retirement in three phases? Here’s how you can explain the three phases of retirement to your clients and help them understand what they will need to consider in each phase.

1. The honeymoon phase

At the start of retirement, you probably see your clients ready to jump into their life of newfound freedom. They might have a list of places to visit and new hobbies to try. Or maybe they just can’t wait to spend more time with friends and family.

During this stage, some of your clients may even decide to keep working in a part-time job they really enjoy.

What’s important for your clients to remember is they likely have years ahead of them, so it’s critical to plan right from the start. Encourage your clients to go over their retirement savings and budget with an annual review to help them see if they are hitting their budget, and explain that this gives them time to make adjustments before it’s too late.

2. The comfort phase

In this second phase of retirement, your clients will probably be settled with their lifestyle and spending more time enjoying their day-to-day lives; travel has likely slowed down.

The primary risk retirees need to think about during this stage is health. Clients may be surprised to learn that a couple that retires at the age of 65 may need to have as much as $265,000 in retirement savings to cover expected long-term healthcare costs.

Explain that this is why you want to help them with their retirement planning long before they hit this stage of retirement, so these expected healthcare costs are in the budget. It’s also a good idea to go over what they will need to think about when it comes to Medicare, supplemental health insurance and the potential for long-term care insurance, as well, since these can help defray medical costs.

Another factor you probably discuss with your clients is where they plan to live. In this phase of retirement, they will likely have already downsized, are thinking about downsizing, or are thinking about senior living communities. Offer to help run through these scenarios to see how changes impact their retirement budget and savings for the long term.

Explain to your clients that this is the stage where they may want to think about assisted living or long-term care facilities; this way they can explore their options ahead of time in case they need these facilities later on.

3. The wind-down phase

At this stage, your clients will be well into retirement and also approaching their late 80s or early 90s. Many might be in assisted living or long-term care facilities, so reinforce the idea early that it’s important to plan and budget for these healthcare costs before they enter this stage of retirement.

By this phase of retirement, make sure your clients understand that they should have documents ready for a power of attorney, healthcare proxies and living wills. Explain that in the event they can’t make decisions for themselves, these documents help ensure that their wishes are carried out as they’d hoped.

Your clients might also want to think about their legacy. As part of their retirement planning, encourage them to think about their estate plan so any remaining retirement savings will be distributed as they wish.

It can be challenging to help your clients understand what they need to do now to impact their future, especially when they feel like retirement is decades away. Use this three-phase approach to help them better understand the realities of retirement so you can help them develop the right plan and budget to maximize their retirement savings for the long term.

Read more about helping your clients set smart and realistic retirement goals.



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