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Your client is on the verge of retirement, but you’ve just found out he’s been spending well beyond his means—so much so he might not be able to retire.

How can you help?

  1. Create a chart:

    Show how the changes will affect his goals. Include assets, accumulated cash flow, total net worth, and how these figures change each year until he’s in the red.

  2. Suggest working longer:

    He could recuperate that lost income by working longer. If he’s not fit enough to commute to a job, Alan Wainer, partner at Crowe Soberman LLP, suggests working from home or opening a consulting business.

  3. Consider renting:

    If working’s not an option at all, suggest he rent out a part of his home. Cathie Hurlburt, partner at Integrated Planning Group and senior planner at Assante Financial Management, says one of her clients owns a two-bedroom condo free and clear. She rents out one room for $600 per month — which adds up to an extra $7,200 straight to her pocket each year.

  4. Tell him to downsize:

    Suggest he move from a house to a condo, which can offer significant capital, not only from the sale but also in the form of lower property taxes and maintenance fees. Explain the positives (e.g. less responsibility because he won’t have to mow the lawn or shovel the driveway).

  5. Discuss investments:

    Bruce Cumming, executive director, private client group and senior investment advisor at Dundee Wealth, says the client could set up a GIC or annuity ladder, which will help stretch income. A life-only annuity is another option if he wants maximum cash flow and isn’t as worried about protecting capital.

  6. Suggest taking on debt:

    If he’s adamant about staying in his million-dollar home, says Cumming, he could take out a line of credit secured against the property. When he dies, any outstanding balance is paid when the home is sold.

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System 1 in action

Originally published on Advisor.ca