How can you help your clients enjoy financial security in retirement while adapting to shifting priorities, goals and market dynamics? While there is no one-size-fits-all approach to this stage of life, retirement solutions that offer more flexibility could provide what your clients are looking for.
A more flexible approach to retirement can enable your clients to choose when and how they can withdraw income if their circumstances suddenly change. It could leave them better equipped to pay for services such as long-term care or nursing home care as well as out-of-pocket medical expenses, whenever they might need it. In addition to more comfortably navigating economic downturns, they could also be better positioned to seize opportunities that make the most of their golden years.
Below are three reasons why your clients may be feeling the need for a more flexible approach as they plan the next stage of their life journey with you.
Increased longevity leading to longer retirements
With dramatically longer life expectancies than what we saw several decades ago — many members of the silver economy can expect to live into their 80s — your clients will be facing either longer working lives, longer retirements or both. A flexible retirement allows your clients the freedom to take control and determine the best work-life balance for them. That could mean treating it as a transition to the next chapter — whether changing to a less demanding job or industry that also pays less, cutting down on their work hours or pursuing self-employment.
With a longer retirement timeline, and growing uncertainty around the future of Social Security benefits, they may also be looking to maximize investment growth opportunities so they can put aside more money. Clients with a higher risk tolerance can prioritize having the flexibility to allocate their investment as they please.
Traditional budgeting techniques often fall short
While many advisors typically follow traditional budgeting techniques, such as the 4% rule, they don't take into account market volatility or the way spending needs fluctuate depending on where clients may be in their retirement. For instance, earlier phases of retirement might see clients more active and spending money on travel and hobbies, whereas later on they may prioritize medical expenses and leaving behind a legacy for their grandchildren.
A flexible, personalized spending strategy that reflects their core spending, discretionary expenses and current market realities may be a better approach. This ensures clients don't miss out on experiences early in their retirement due to the fear of running out of funds, and allows them to pursue a lifestyle that matches their aspirations.
Better preparation for unexpected events
Thanks to changes in the job market, sudden illness or other unexpected events, your clients could find themselves retiring much sooner than they had planned. If they had been relying on their salary, had their working life cut short and are now having difficulty finding even part-time jobs, having a backup plan would be essential for their financial security.
Investment products that can offer guaranteed income for a chosen period of time or for life can provide a flexible approach to long-term retirement planning, as your clients can delay making decisions on to how to use their pension savings until they can better understand their circumstances. The death benefits and survivor benefits associated with annuities can also address elements of their unique legacy goals.
Clients looking for a flexible solution to retirement? Consider explaining the benefits of variable annuities.
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