Clients look to us to help them save money and accumulate wealth. As long as they take our advice, we're pretty good at that. But what happens when they reach the point of having plenty?
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It is difficult for clients to transition to retirement (or semi-retirement) beyond the issues surrounding identity and what to do with time. Those that have been saving their whole lives are now expected to draw from savings. It's not so simple as flicking a switch in their minds.
There are two areas to consider: regular monthly cash flow needs and intermittent discretionary expenditures such as travel and major purchases. Even the former represents a challenge.
As an advisor, I recommend that I clients not change or limit their lifestyle for six to twelve months. This will provide a baseline for planning purposes going forward. I also set up regular monthly deposits into their checking accounts equivalent to their prior take-home pay. With the money arriving on a regular basis, just like their paychecks, it is psychologically easier to handle.
To reassure the recently (or ongoing) retired clients, I like to provide table or chart showing how long their money will last based on varying return rates and annual withdrawals. Merely seeing this in black and white (or better yet - color) gives a better sense of confidence.
Many clients are reluctant to spend money. I believe it is our job as advisors to not only offer peace of mind but also to encourage spending when we notice clients living too conservatively.
One example: A rather large client complained once of how hard it was to fly coach. His withdrawal rate was under two percent per year, so I told him he should fly business class. After explaining the numbers, he was very excited. Now, before each trip, he calls me to ask, It's still ok for me to book business class, right?
Another spending suggestion I make is for older clients to pay for family vacations, including their children and grandchildren. This creates special memories and is a great way to enjoy the benefits of all the years of hard work. Clients who have done this unanimously tell me it's the best thing they've ever done.
Helping your clients to enjoy retirement is one of the most valuable – and rewarding - parts of what we do.