And the clients should not rely on Social Security to bail them out of an underfunded plan. One recent survey suggests that even though some clients are becoming more skeptical of the program, they are also becoming overdependent on it.
“Most workers are concerned about Social Security, but they are also counting on Social Security as a meaningful source of income in retirement,” said Transamerica in a retirement survey.
Advisors often say they try to correct for this overconfidence by underestimating what clients will get out of the program.
Open Channels Of Communication
Anthony Ogorek, a certified financial planner in Buffalo, N.Y., says that advisors should meet frequently with clients who are 10 years out from their target retirement date. This will help everybody avoid a blowup.
“A plan shouldn’t be a static document. It must be updated frequently based on circumstances,” Ogorek says. “It’s like illness and going to a doctor. If you see the doctor on a regular basis, then you are more likely to catch the problem.”
He says advisors should be frank with clients—and tell them that a changed retirement date will change the assumptions of the plan and dramatically alter people’s expectations about how and when they can stop working.
“Maybe someone needs to work longer or maybe someone will need to have a lesser lifestyle in retirement,” he says.
If the client relationship is good, the channels of communication should already be open, Ogorek says, and that will stop problems before they occur.
But many clients aren’t updating their advisors, or advisors aren’t pushing for enough meetings.