Financial planning has historically focused on helping people achieve major financial goals, such as sending children to college or retiring comfortably.
But what about retirees, who, for the most part, have already achieved their goals and simply want to preserve their way of life? Life changes when you are living your goals rather than aspiring toward them. Suddenly, you have more to lose than to gain and you want to know how to keep what you have. Building wealth is not necessarily important in this stage of life, but preservation of wealth is vital. With more Americans entering this phase of life, there is a growing need for education on how to manage money within retirement. Ironically, there will also be a diminishing need for workshops on preparing for retirement, as the boomers are followed by the next generation, the Baby Bust group.
Consider these statistics:
- The largest growing population segment in our country is of people age 100 years or older.
- Within the next decade, most of the boomers will reach traditional retirement age. About 25% of the U.S. population–one in four people–will be retired.
- Many of us will spend more years in retirement than we did working.
Yet when you search on the internet for retirement workshops, you'll find page after page of workshops that are almost exclusively focused on building wealth for retirement rather than managing wealth in retirement. No one seems to be educating retirees about managing their income and developing the right distribution strategies. Estate planning is well covered–probably because it's a "goal" to provide money to heirs. But helping retirees to manage the money they have today, while they are still in retirement, is conspicuously absent in most financial education efforts.
What does this mean for your financial planning practice? If you're a visionary and if you plan to be in the business for a long time, you should consider shifting your focus over the next few years toward managing wealth within retirement as opposed to preparing clients for retirement.
From our experience at Financial Finesse in educating retirement plan participants for our plan sponsor clients, there are four key areas where retirees need both financial education and financial planning:
Money management. Managing their monthly expenses to ensure they are not forced to take large distributions from their retirement nest eggs to meet current obligations.
Distribution planning. Planning distributions to ensure that they are not taking too much or too little from their retirement accounts, minimizing tax liability, and meeting Required Minimum Distribution amounts.
