Three Critical Conversations to Have with Near Retirees

Talking about these subjects can be challenging, even if they’ve been planning.

By Beau Henderson

Approaching retirement can be an exciting time for your clients. They have worked hard to save and are in a position to soon reap the benefits. But there are certain considerations they need to be made aware of that they may not be thinking about just yet. Like what will their lives actually look like during retirement? When should they start taking Social Security benefits? And do they need to plan for long-term care?

These can be hard conversations to have with clients, but I find that if they have worked tirelessly at planning for retirement up to this point, they are more receptive to talking about these more complex subjects. Even then, it can still be challenging. But, as trusted financial advisors, it is our responsibility to ease those concerns, help our clients plan for the unexpected and prepare them for a fulfilling retirement.

The Social Security Question

 The most important question about claiming Social Security benefits is: When should I start taking my benefits? As always, waiting as long as possible to claim benefits will provide the highest payout starting point, but one’s individual cash needs will often dictate this answer. Factors like health, family situation and other income streams all play into when someone will start to draw on Social Security. This is how the benefits question transforms into a personal discussion with your client. Being direct about how important this topic is will help to resolve it.

Without a steady stream of income coming in from employment, Social Security considerations are some of the most critical questions you need to raise because there is no room for error. As advisors, it’s our job to make sure the client is aware of the ramifications of certain financial decisions, such as drawing their Social Security benefits too early.

In 2019, a United Income study showed 96% of Americans aren’t filing at the right time to receive their optimal Social Security benefits. That’s an enormous amount of people who aren’t taking full advantage of a benefit they have paid into all of their working life. The same study estimates that by not waiting to draw on their benefits, the average American household loses an astounding $111,000 in potential retirement income. This point cannot be emphasized enough and there is a reason I am listing it first.

A few years back, I ran into one of my good friends at the grocery store. He is a successful business owner, but during our brief catch-up, I learned that he called the Social Security Administration office and asked them for advice on when to begin taking his benefit. Without knowing his full background and financial situation, he was encouraged to take the benefit too soon, which will likely end up costing his spouse as much as $200,000 or more in Social Security income. For financial advisors, raising your Social Security IQ could save your clients from making a similar, irrevocable mistake.

Be sure also to let your clients know that there were changes to Social Security in 2021 that will impact them:

  • Social Security recipients got a 1.3% raise for 2021, lower than the 2020 hike of 1.6%.
  • The maximum earnings cap subject to the Social Security tax also increased from $137,700 to $142,800 per year.
  • The maximum benefit in 2021 for people retiring at the typical retirement age (approximately 66) is $3,148 a month – almost $38,000 a year.

Long-term-Care Considerations

 It’s no secret that planning for long-term care can be costly and talking about it can be difficult. I have found that clients struggle with the idea of losing their mobility and independence. Conversations about long-term care can be scary for people because it evokes fear of losing one’s self-sufficiency and the burden it may place on their loved ones. But clients need to know that it’s necessary to plan for the unexpected so they can be as prepared as possible financially for whatever life throws at them.

Yes, planning for unanticipated illnesses can be challenging, but it is a vital part of considerations that need to be made. Sickness or injuries can occur unexpectedly and may lead to a sooner-than-expected need for long-term care.

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Most health insurance plans, including Medicare, do not cover long-term care. Legislation has recently been proposed that aims to strengthen the current system for long-term care in the U.S. While this proposal is certainly a welcome one, your client’s long-term care requirements are still an increasingly costly expense that may loom in their future.

Addressing this now and discussing their options is paramount to good risk management for both their finances and their families. In best-case scenarios, long-term care coverage goes unused. But when it’s needed, it can potentially save a client’s retirement. When such coverage is not in place, the unplanned expenses can often decimate retirement savings and force drastic changes to an individual’s projections.

Many years ago, a meeting with a longtime client solidified my belief in the importance of long-term care planning. After her mother suffered an unexpected event that required an extended stay at an assisted living facility, it became apparent that her mother’s retirement funds were quickly being depleted. Ultimately, and unfortunately, this did happen, and with fewer assets to cover these new expenses my client had to make the difficult decision to move her mother to another facility that was lower quality than what they both would have preferred.

“It’s parental situations like this that light a fire under them to consider the serious ramifications of failing to plan for their own unexpected health events.”

It was this terrible series of events that showed my client and her husband the tragic consequences that can come about without proper long-term-care planning. For her, and most of my clients, it’s parental situations like this that light a fire under them to consider the serious ramifications of failing to plan for their own unexpected health events. Proactive discussions about long-term-care planning can alleviate much of the unnecessary stress and uncertainty that comes along when it is actually needed.

Additional Reading: Gerontologist Says People Need Advisors Involved in LTC Decisions

Retirement after the numbers

So, your client is ready to retire. You’ve run the models and they’re in great shape — maybe even ahead of schedule. You’ve done a fantastic job, right? Well, the numbers are only half of the story.

Making sure your client is ready to retire means understanding how they envision enjoying their golden years. Unfortunately, even if a client thinks they are prepared financially for retirement, they often haven’t even considered the non-financial aspect of retirement planning.

Maintaining one’s health is one of the most important non-financial points to address with your clients. Staying mentally and physically fit is vital after people leave the workforce and it becomes increasingly difficult to maintain as we get older. Understanding how retirement changes relationships, for better or worse, is an often-overlooked aspect of retirement planning. Many underestimate how retirement will affect their children or their marriage and other key relationships in their life.

In one conversation with a client and his spouse, they learned that they each had very different expectations for what was to unfold during my client’s retirement. One of them expected more rest and relaxation while the other thought that more projects around their property would get done. This fundamental difference could have had a lasting impact on their marriage had I not encouraged them to have this discussion early. As advisors, we have to be able to prompt these conversations with clients to make sure they aren’t kicking the can down the road until retirement when these surprises can occur.

A fulfilling retirement often requires redirecting the energy that your clients once spent on working or building a business to something new. Now, they have the freedom and the time to work on projects that matter most to them. They could be interested in giving back to the community, focusing on a hobby, new or old, or starting a new business. Maybe your clients are looking forward to kicking their feet up and relaxing. Planting the seed in their mind about how they plan to spend their time in retirement can save them the initial shock their lifestyle change can bring.

Last Thoughts

 Sometimes it’s easy to broach these topics with clients, usually when they have contemplated these tough decisions on their own. At that point it’s up to me to merely help guide them or provide suggestions based on my past experiences. Other times it is more difficult and feels like I am bringing up a problem they haven’t considered before. But with tact, honesty and sincerity in approach, we can come to suitable resolutions and create a strategy that provides them with confidence and certainty as they transition into retirement.

James “Beau” Henderson is the founder of RichLife Advisors LLC, a wealth and retirement planning firm that provides pre-retirees and retirees with holistic wealth management services. His firm provides provides investment advisory services through Fiduciary
Capital, Inc. Beau is a licensed insurance professional in GA and holds RICP, CLTC and Certified Financial Fiduciary licensing.



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