Many retirees must adjust their lifestyle to fit the constraints of their income. As a financial advisor, your goal instead is to help your clients achieve their desired lifestyle by adjusting how much they save now. Doing this takes careful planning, starting with creating annual budgets with your clients and helping them set price tags on future one-time expenses.
Once your clients have a clear picture of how much their retirement may cost, you can help them determine the best savings and investment strategies to reach their goals. For some clients, it may make sense to supplement retirement plans and Social Security with an additional source of income, such as a variable annuity.
Create a budget
To help your clients get an accurate picture of their retirement expenses, encourage them to track how much they spend now on basics like utilities, food and insurance. These costs may not change a great deal in retirement. Some clients may pay off their mortgages and cars by the time they retire, but other clients will need to factor in those costs as well.
Make sure you discuss other expenses too, such as a big-ticket home renovation or any plans the client may have to travel or pursue new hobbies. The cost of new activities can add up, so ask your clients to think through them in as much detail as possible. How often would they like to travel? What sorts of accommodations will they want? How much will that new sailboat or RV cost? Asking these sorts of questions now can help your clients determine how much they need to save.
Estimate healthcare costs
As your clients grow older, health will likely become a more pressing concern, and healthcare costs can start to add up. If a client plans to retire before the age of 65, he or she should be sure to account for the cost of private health insurance. Even after Medicare kicks in at age 65, your client could face substantial healthcare costs. For instance, Medicare does not cover routine dental and eye exams, hearing exams and hearing aids, or the cost of long-term care, among other expenses. Some clients may want to invest in supplemental insurance to cover such costs.
Develop strategies to pay
Once your clients have an idea of what they want their retirement to look like and how much it will cost, you can help them create a financial strategy to make their plans a reality. This strategy may include optimizing 401(k)s, delaying Social Security to collect more benefits and investing in inflation-beating stocks to maintain growth potential within their portfolios. You should also encourage your clients to consider investing in variable annuities, which offer tax-deferred growth and may have no contribution limits. What's more, your clients can opt to purchase extra benefits, such as riders that will pay out a guaranteed stream of income or will ensure a bequest to beneficiaries.1
Plan for the unexpected
No one can predict every expense that retirement will bring. Unexpected illnesses or accidents can put a dent in anyone's budget, and opportunities to travel or help out a loved one may come along at any moment. What's more, no one can predict with certainty how long their retirement will last, especially as life expectancies continue to rise. For these reasons, it's important that your clients build some flexibility into their retirement plans. By checking in with your clients regularly and keeping tabs on any changes to their situation, you can make the necessary adjustments to help ensure they maintain their lifestyle throughout their retirement years.
1 Any guarantees are based on the claims-paying ability of the issuing insurance company.
This material was prepared to support the promotion of insurance products underwritten by GWFS Equities, Inc., Member FINRA/SIPC and issued by Great-West Life & Annuity Insurance Company (GWL&A) or in New York, Great-West Life & Annuity Insurance Company of New York (GWL&A of NY). Any guarantees are subject to the claims-paying ability of the insurer and do not apply to the subaccounts. GWFS Equities, Inc. is a wholly owned subsidiary of GWL&A. GWL&A is not licensed to do business in New York. Contracts may not be available in all states.
Before purchasing a variable annuity, investors should carefully read the prospectus which contains an annuity’s investment objectives, risks, charges, expenses, and other information associated with the annuity and its investment options. You may obtain a prospectus for the annuity and its underlying funds by calling 877-723-8723. Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York do not offer or provide investment, fiduciary, financial, legal, or tax advice, or act in a fiduciary capacity, for any client unless explicitly described in writing. Please consult with your investment advisor, attorney and/or tax advisor as needed.
Variable annuities are long-term investments and may not be suitable for all investors. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59 ½. An investment in a variable annuity is subject to fluctuating values of the underlying investment options, and it entails risk, including the possible loss of principal. A withdrawal charge may also apply.
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