Advisor Today - July/August 2015 - (Page 34)

FINANCIAL PLANNING FINANCIAL PLANNING By Douglas Sheahan Closing the Gap Here is how to help your Boomer clients move closer to the magic $1 million they need for retirement. $127,000. With a standard withdrawal rate of 3.5 percent, a $1 million portfolio can provide a reliable $35,000 a year in income. T hat's the amount the average Baby Boomer has saved for retirement, according to the TransAmerica Center for Retirement Studies. As someone who meets with dozens of clients every week to discuss retirement planning, I can tell you that amount is nowhere near enough for someone to live comfortably into their Golden Years. As financial advisors, our mission is to help clients develop long-term money management strategies. We counsel people from all walks of life, but like many of you, I'm seeing more people over age 50 come in worried about their retirement. They are asking: Do I have enough to retire? Can I retire at age 65 or do I have to wait 10 or 15 more years? Can I rely on Social Security for my retirement? Their worry is warranted. People are living longer-the current life expectancy for an American is nearly 79 years old. For Boomers now and in the future who want to retire, $1 milllion at a minimum is the magic number to maintain their standard of living. With a standard withdraw rate of 3.5 percent, a $1 million portfolio can provide a reliable $35,000 a year in income. Add that to the average couple's Social Security income of $36,000 per year, and the total is $71,000 a year. However, with the current average, most people are at least $850,000 short of the $1 million they need. A great opportunity Boomers are a promising longterm market for financial advisors. As an industry, we need to 34 ADVISOR TODAY | July/August 2015 be laser-focused on retirement planning for this demographic and what I call the "pre-Baby Boomer" market (people in their mid to late 30s and 40s). Only 40 percent of Baby Boomers who are saving and investing for retirement use a professional financial advisor to help with their wealth management. This represents a huge opportunity to better target this market, provide them with valuable services and grow your business. Though $1 million may seem like a lot, here are three pieces of advice every financial advisor should give to his clients to help them get there (or at least close to it). 1. Develop a retirement-readiness plan. Clients with a target retirement date within the next five years should have a plan for the first five years of retirement income. You should work with your clients to develop a strategy for how they'll spend their income once they are no longer working. Have a sit-down meeting with them to review their current budgeting, savings and expenses. Draw up a retirement budget and have them follow it for six months. If they find that it's too restrictive, work with them to maximize savings before their target retirement date. If they are currently contributing 10 percent of their income or less to an IRA or other retirement accounts, encourage them to increase that figure to at least 15 percent or to fund those accounts to the maximum limit. They also can divert money from low-interest accounts to short-term high yield bonds with medium risk. I know the rule of thumb is that people should get more conservative with their investments as they age,

Table of Contents for the Digital Edition of Advisor Today - July/August 2015

From The Editor
Viewpoint
New Products
How Do You Create the Million-Dollar-Plus Practice?
Traits of Top Performers
The Business Benefits of a Pipeline Mentality
What Does It Mean to Act Ethically?
Variable Universal Life is Back
Sell More LTCI By Selling Less!
Overcoming the Most Common DI Objections
Divorce DI
Mitigating Retirement Risks with Life Insurance
Creating Irreplaceable Capital
Closing the Gap
Financial Future Less than Rosy for Boomers and GenX
Estate Planning and Annuities?
Ignite Your Sales Potential
A Closer Look at BTID
Upholding the Tradition
NAIFA’s Candidates for Election
NAIFA News
Addicted to Rejection
What is Keeping Your Senior Clients Up At Night?
Advertiser Index
Back Page

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