What keeps financial advisors up at night? A majority say their clients are mostly worried about outliving their assets and few have set aside enough money to retire early without having to reduce their living standards.

These were the findings in a report titled “Retirement Planning Survey 2019,” conducted by Financial Advisor magazine. The survey, which polled 1,130 financial advisors on the state of their clients’ outlook and retirement plans, found that 42% of advisors said clients are concerned about outliving their assets. That same issue also was highlighted by 45% of advisors as one of the biggest threats that their retired clients are experiencing.

“Everybody is worried about outliving their assets,” says Galen Norby, a CFP with Woodbury Financial Services in Wichita, Kan. He adds that long-term care is the biggest problem retirees face but “most bury their heads in the sand and don’t want to talk about it.”

Louis Avalos of Waddell & Reed Inc. in Irvine, Calif., says both high earners and low earners worry about outliving assets, especially if they are not blessed with a large pension to support them. “If they don’t have the large pension or Social Security, this becomes a concern as the amount of their retirement funds start to look small,” Avalos says.

A total of 63% of respondents reported that most of their retired clients have saved $100,000 to $1 million. Twenty-one percent say their clients have saved $1 million to $2 million, and 10% say most of their clients are in the $2.1 million to $5 million range.

But roughly 70% of the advisors said half of their clients are not prepared to walk away from their jobs and jet off to the places of their dreams and enjoy life. In fact, financial advisors are finding that many of their clients are delaying their golden years by working longer. The survey found 55% of their clients continue to work because they feel they don’t have enough assets to retire. Forty-two percent report they are there for the health insurance, and 27% say their clients keep working because they cannot sell a business or professional practice.

On a brighter note, a lopsided 88% say their clients continue to work because they enjoy doing so.

Some financial experts have suggested that to retire comfortably you need to have $1 million or more saved. Not so, says Norby. “Everybody has a different number. There is no magic number.”

Robert Fragasso of Fragasso Financial Advisors in Pittsburgh agrees. “There is not one number that works universally.” He looks at a number of variables, including the clients’ level of retirement spending, their age, state of health, their tax and extended family considerations, and their local cost-of-living increase expectations. “That is why each family must accomplish an individualized set of financial projections and revisit them each year to gauge [whether they are] on track,” he argues.

With the high cost of medical bills, it’s not surprising that health-care costs rank high on the respondents’ list of threats to their clients. Almost 50% view unanticipated health-care costs as one of the biggest threats their clients have experienced. Another 42% see a stock market crash early in retirement as their clients’ biggest threat, while 37% say the worry is about clients generating enough of a reliable income stream.

Indeed, generating a predictable income stream ranks second to outliving their assets as a concern of clients. But Fragasso says that’s because many people only think of income, dividends and interest. “It is the total return from a portfolio that must generate sufficient income. That would include dividends, interest and realized gains,” he says. “We rebalance the portfolio back to the originally agreed upon asset allocation model each quarter when it becomes out of line. This allows for cash to be freed from all three sources to send the required monthly distributions for living.”

Interestingly enough, many of those who saw generating a reliable income stream as their clients’ biggest threat said this problem is most acute among clients who have done well enough in saving for retirement that they can retire early without having to reduce their living standard. That’s partly because these clients aren’t eligible for Social Security yet and will be forced to pay penalties to access their qualified plan assets before they reach 59½. Many of these clients also have concerns about supporting their adult children and other family members, according to the advisors surveyed.

“The basic reality for the clients is they are no longer earning money, so the investments are no longer in accumulation phase and are in the living money phase,” Avalos explains. He says he always cautions that health issues are much bigger than a market crash. “I always tell my clients one medical episode will ruin the best plans, so make sure you have proper health insurance and create a healthy lifestyle for yourself.”

Fragasso says his firm works ahead and leaves a certain level of money market cash so that the client has the comfort of not needing to raise cash in a down period in the inevitable cycles of the stock and bond markets.

“I constantly ask clients, ‘How much do you need to spend each year to survive and enjoy retirement?’” says Scot Hanson of EFS Advisors in Cambridge, Minn. He points out that if t

he withdrawal rate is more than 4% to 5%, then it is non-sustainable. “You are going to run out of money. How then do you plan to deal with it? Get another job? Or go broke and live on less in the future? It is up to clients to decide their own fate,” Hanson says.

Advisors are split when it comes to recommending portfolio withdrawal rates for their clients. Fully one-third say they advise between 3% and 4% in the first few years of retirement. Another 32% say they recommend for withdrawal a starting point of between 4% and 5% of their clients’ portfolio, adjusted annually for inflation. And 22% say they adjust the withdrawal rate every year, depending on several factors.

“The withdrawal depends on the client’s age,” Avalos says. “With some taking retirement before 70½ years old, the need to establish a rate that will not draw down the principal at a high rate is normally desired by most clients.

“They understand that [the] withdrawal rate will change once they start the RMD [required minimum distribution] process at 70½, so in the meantime they want the assets to be growing as much as possible and drawing down at [a] lower rate of 4%.”

On the other hand, Hanson says he generally accepts that a 4% to 5% withdrawal rate is sustainable, with 4% as the preference. “But much depends on Social Security election decision. I try to tell clients (higher earning and older spouses) to delay Social Security until age 70. With this election, you are getting an 8% return, which can offset lower investment returns, thus sustain your 4% to 5% overall return,” he says.

Based on the responses, the stock market’s volatility in 2018 caused some jitters among financial advisors. Their actions ranged from rebalancing portfolios to increase equities (24%), selling off equities (13%), increasing allocations to cash (23%), purchasing annuities (19%), adding alternative investment positions (15%) and selling fixed income (8%).

A greater number, however, 37%, were not moved to do anything. They made no changes to their clients’ portfolios.

“What occurred in 2018, and the same for the 2008 market decline, should have zero effect on your overall financial plan, as these events are expected long term to happen,” notes Hanson. “If the market decline did matter, I tell clients, ‘You had the wrong plan, wrong strategy, wrong advisor. Time to get a new CFP.’”

Norby agrees. “I didn’t need to make any changes. We set long-term goals and stick with them. You’ve got to train clients from the beginning,” he says.