Filed Under:Your Practice, Practice Management

Getting into the retirement income planning game

Part 2 of a series

U.S. demographic trends build a strong case for adding retirement income planning (RIP) services to your business. An estimated 8,000 baby boomers are turning 65 each day and despite years of saving, many of them are clueless about converting their savings to a sustainable retirement income.

Phil Harriman, CLU®, ChFC®, RFC, with financial advisors Lebel & Harriman LLP in Falmouth, Maine and a past president of the Million Dollar Round Table (MDRT), saw an opportunity in those demographics. “What that means is probably for the next decade the largest growing segment of our population is heading headstrong and headlong right into the final phase of their working years and will need to have a plan to maintain their lifestyle,” he says.

Pfau points out that while traditional assets like stocks and bonds are part of the retired client’s asset allocation, advisors also need to understand how income sources like annuities and pensions can influence clients’ finances. Clients who receive Social Security and pension benefits, for example, can have very different investment portfolios than retirees who lack those reliable income sources. Additionally, the decision of when to start taking Social Security benefits is another factor that can have a major impact on the client’s lifetime finances.

Retirement income planners should also look beyond financial assets to include human capital and social capital. Some clients will have the skills and experience to continue working (i.e., human capital), allowing them to preserve their savings longer and delay the receipt of Social Security benefits. Clients with strong family and social support (social capital) also face a different situation than those without these resources. Traditional pre-retirement wealth management overlooks these areas, Pfau maintains. “There’s a lot more to think about when you’re building the income strategy for retirement and you want to draw on all those different household resources,” he says.

Practice transition

Acquiring the requisite skills and knowledge is the first step; adding RIP services to your business is the next. Harriman uses the R.I.S.K.™ (Retirement Income Survival Kit) retirement income-planning program developed by ValMark Securities Inc., his broker-dealer. That program considers the risks retirees face, such as sequence of returns, longevity, health and inflation, among others. Harriman’s firm has also purchased additional financial planning software and staff members have undertaken RIP training. That allows them to help clients understand the sources and uses of their retirement incomes, Harriman explains: “Do they really have enough income coming in to support the lifestyle that they expect to lead? And, we talk about lifeboats. What if you live too long, what are you going to do? What if you or your family member spouse needs medical assistance? Do you have lifeboats to get into should the unexpected happen?”

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Nichole Morford

Nichole Morford
Managing Editor

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