Clients need ‘life guides’ for retirement — not just investment advice

Being able to retire isn’t just about money. Rather, its success is a balance of four factors: health, family, purpose and finances, Age Wave co-founder Maddy Dychtwald said Tuesday, during the second day of the InvestmentNews Retirement Income Summit.

“Purpose [is] a very important part of retirement. Older adults want to feel useful,” Dychtwald said. “They want to feel like they have a reason to get up every single morning. Retirees derive the greatest sense of purpose from time they spend with loved ones.”

Those four aspects are connected in other ways. For example, the greatest financial worry retirees say they have is the cost of health care and long-term care, she said, citing Age Wave survey data.

People are also viewing retirement entirely differently than they did a few decades ago, she said. For most, it isn’t a time to slow down and relax — instead, it is an opportunity for reinvention and a time to explore passions.

That gives financial advisers much to consider, and significant opportunities to prove their value to retirees and near-retirees panelists said.

“You need to be a guide. You need to help your clients better understand retirement and how it is morphing and changing, and how it is interconnected,” Dychtwald said.


The five years before and after retirement day are the highest risk for people, financially and emotionally, said Jeannie Underwood-Kotner, adviser practice consultant at Global Atlantic Financial Group.

It is also a risky time for their advisers, she said. During that time frame, clients often pare down their financial advice relationships, usually ending up with one.

“They are looking for a financial adviser to be a guide for them,” Underwood-Kotner said. “We have to guide them not only with their money, but with their life.”

That means have a “retirement blueprint.” What can make retirement such an uncomfortable time is that there aren’t any rules, and that doesn’t sit well with humans who have lived their entire lives up to that point following patterns, she said.

“We step into this world of retirement, and there’s no more structure,” she said. “That’s really hard for the human mind.”

The adviser who can instill confidence is the one who will retain clients, she said.

People place an average of 90% of their assets with financial professionals who create retirement income plans for them, she said, citing data from Limra.


The reality of working past retirement age leads many people to start businesses — and they can be quite successful in doing so, personal-finance and retirement author Kerry Hannon said.

“At this stage in life many people want the autonomy and the flexibility of working for themselves. They’re ready to be their own boss,” Hannon said. “People founding a business at age 50 are twice as likely to succeed as those who are 30.”

In normal times, people are often driven to become their own bosses because of the ageism in the workforce, she said. “You simply get fed up with the rejection.”

But the COVID-19 crisis is anything but normal. Older workers are losing their jobs and are facing unexpected early retirements.

For some, though, the crisis will drive them to start businesses — that has been the trend after major disruptions and catastrophes, including 9/11 and the Great Recession, she said.

“This is the time that your clients are going to be seeking out some solutions,” she said. “There are new businesses springing up all the time that are going to be coming out of this.”


There is a difference in planning for a traditional end-of-work retirement and one built for an encore career, bridge job, gig work or new business venture, Standford Center on Longevity research scholar Steve Vernon said.

“It’s important when you’re working with your clients to determine, are you planning for your second middle age, or are you planning for your retirement?” Vernon said. “This is where you can add a lot of value.”

That can include a retirement-income analysis under different scenarios for the time when clients will be 62 to 70, he said. Those scenarios can include working longer in a current job, working part time or transitioning to a different work arrangement, he noted.

To help increase income-replacement levels, advisers can show clients options to reduce spending, adjust work assumptions, move to less expensive location or use home equity, he said.


Using home equity for retirement income, particularly through reverse mortgages is often considered a last resort, and that is a mistake, said Wade Pfau, professor of retirement income at The American College of Financial Services.

“Time has shown that that is the worst way to treat a reverse-mortgage strategy,” Pfau said.

Advisers should consider that strategy for clients well ahead of time, he said. Because people don’t need to take payments from it immediately, they treat a reverse mortgage as a line of credit, he said.

Payments can be taken strategically, such as when investment assets are down, as a bridge to help delay claiming Social Security or to pay taxes on a Roth conversion, he said. With proper planning, that kind of strategy can leave clients with higher legacy assets than if investment assets were used to cover such costs, he said.

“It’s the one tool that benefits from low interest rates,” he said. “The lower the interest rate, the higher the borrowing capacity.”

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