A volatile economy and wild fluctuations in retirement account balances have consumers on edge, and upcoming transparency legislation is likely to sound more alarms as they question fees they're not used to seeing printed on their retirement account statements. Persuading them to continue investing in the future and that their hard-earned money is safe may seem like an uphill battle -- but it's one many advisors know is worth fighting.

The best solutions lie in honest conversations. It's time to sit down with account holders and explain how and why their retirement income might fluctuate, how much risk is necessary and how to collaborate on a plan that makes clients comfortable without sacrificing the longer-term benefits of investing.

Prior to that conversation, of course, advisors must roll up their sleeves and perform some analyses to come up with appropriate strategies. How will your clients drive income throughout their retirement? It's no longer enough for you to know the answers; you must be prepared to communicate the details to clients who may be wary of Wall Street.

There are myriad tools at our disposal to illustrate these strategies. Cash-flow modeling is one option. Balances aren't effective in a vacuum. Show earners how investments will be allocated to short-term and long-term vehicles, and create outlines that show exactly where their retirement money will come from. Discuss risk tolerance and clarify the importance of embracing an appropriate level of uncertainty.

Always remember that even the savviest of clients don't always grasp the nuanced differences among guaranteed income annuities, coupon payments from bonds, and dividend-paying stocks. Devote part of the conversation to clarifying the goals of each plan component as well as how the plan works as a whole. Explain how the strategies are layered and what that accomplishes.

Similarly, they may not perceive the important differences in strategy between those who are building a nest egg and those who are preparing for imminent retirement. Explain the reasons for choosing particular investment vehicles and what risks are appropriate based on varying account balances and income needs.

The Baby Boomers' Brave New Retirement World
The baby boomers have always required special attention, and now is no exception. Recent economic developments indicate they'll need to pay more heed to the risk of high inflation and increased principal volatility, while trying to maintain a high standard of living. Compounding the problem, boomers are expected to live much longer than previous retirees and must rely more heavily on private retirement plans now that pension plans are nearing extinction and the future of Social Security is more uncertain.  

These are not clients used to taking no for an answer; their parents lived through the Great Depression. These folks expect more out of their retirement but will have fewer resources with which to build it.

All this means that this crowd will need to take greater financial risk if they want their retirement years to live up to their hopes. That means leaning more heavily toward equities or other growth oriented investments, or readjusting their retirement income expectations.   

Cash flow rather than income is the name of the game. Make sure these clients understand that cash flow can come from dividends, interest, capital gains and returns. Whenever possible, help them to adjust their thinking about dipping into principals. Many are afraid of running out of money-a reasonable fear, but place the focus on determining a sustainable withdrawal rate that can see them through and ease their fears.