Retirement advice is everywhere these days: “save $1 million,” “plan to replace 80 percent of your pre-retirement income,” “invest in target date funds,” or “systematically withdraw 4 percent of your assets.”

Is it possible that all of this guidance can be right for everyone? Maybe. But these are broad guidelines. In order to deliver real retirement security to the masses, we have to recognize that an individual’s needs are multi-dimensional, complex, personal and can’t always be solved by a simple rule of thumb. I believe there are three things you need to ask your clients who are thinking about retirement, to help position their retirement portfolios in a customized, optimal way:

1. What Will Your Basic Expenses Be?

The first step for clients is to think about what their basic expenses will be in retirement. Ideally, they should have guaranteed income to cover those expenses. But keep in mind, “basic expenses” aren’t what they used to be. With today’s retirees and pre-retirees, you’ll be talking about more than just food, housing, clothing and utility bills—the things you usually think about when you list the basics. A 2017 New York Life Consumer Retirement Income Planning Study conducted by Greenwald & Associates asked baby boomers about what they consider to be basic expenses in retirement. Not surprisingly, health care tops the list, but high speed internet (95 percent of respondents), shopping (75 percent), weekend getaway (62 percent), vacations (60 percent), smart phones (57 percent) and professional hair color (47 percent) were also listed by boomers as a “basic” expense.

Basic expenses aren’t the same for everyone either. Clients should consider what else retirement income can cover—it could be a legacy need or a protection need, among others. Ask your clients what is most important to them when it comes to expenses. I’ve heard from financial professionals who report that golf club memberships have moved to the basic column, along with covering education costs for children or grandchildren.

2. Do You Want To Take Risk Off The Table?

Ask your clients to fast forward 5 or 10 years to a time when they may be withdrawing from their savings for income in retirement. Then ask them to think about all the things that can derail their plans—market fluctuations, living longer than they expected (a good problem to have!), taking out too much from their savings too quickly. These are all real risks in retirement. The good news is, they can all be mitigated with risk pooling and with insuring a portion of retirement income. The benefits of risk pooling can be critical to clients who, during accumulation phase, have been “going it alone.” 

Imagine your now 65-year-old client has earmarked $1 million for retirement income. With a modest withdrawal rate of 3.5 percent, this equates to approximately $35,000 a year. He may plan to increase that income stream each year to keep pace with inflation. With longevity being common in his family, and markets fluctuating daily, he might quickly find out that his planned income stream of $35,000 is far from guaranteed and might not last, depending on how long he lives.

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