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.

For comparison, your client could invest $1 million in an immediate annuity, to secure $58,982 in annual income for life (based on rates for New York Life Guaranteed Lifetime Income Annuity, 65-year-old male, Life with Cash Refund payout option as of 03/03/2017.) Or maybe he invests a portion of his assets in the annuity. No matter the amount, his annuity income is guaranteed and unaffected by the markets. With income annuities, it’s the insurer’s job to pool risk and to manage that risk effectively to provide long-term guarantees. Risk pooling can help create a secure payout that would be difficult to match in the broader financial markets on one’s own. By pooling risk and removing investment risk, everyone wins.

In fact, research by New York Life and others has shown that retirement portfolios are optimized by adding insured assets like an income annuity. By utilizing a portion of the client’s assets in this way, there is greater capacity to bear risk in the rest of a portfolio.  Because income annuities are not correlated with market swings, they exert a powerful smoothing effect on overall performance.

3. What Keeps You Up At Night?   

The top worry for people when thinking about retirement is that they will run out of money. There are real concerns around health-care spending, inflation, taxes and other income-draining components outside one's control in retirement. 

With that concern in mind, many current retirees prefer to hold onto their nest eggs, and that behavior is often driven by fear. When we look at how retirees spend their nest eggs, we see that many tend to spend only their guaranteed sources of income, like Social Security, pensions and annuity income. One way to help your clients enjoy more of their nest egg is by creating more insured income so they’re more confident to spend it.

Economists traditionally assume that people act rationally when it comes to their money. The study of behavioral finance shows, however, that emotion drives a great deal of our actions (and often, inaction) with regard to our finances, even when it’s not in our own best interest. Uncovering what keeps your client up at night will give you insight into their needs and help you best present solutions that address their specific concerns.

These questions are a great first step in understanding what’s most important to your clients and how they think about the future. They’ll help you tailor a solution that works for them and can help them succeed in retirement. 

What other important questions do you ask your clients? Send me a note at [email protected].

Dylan Huang is the head of retail annuities at New York Life.