Not one of your clients probably aims to live a pinched and circumscribed existence in retirement, but sometimes life gets in the way. As this month’s Global View makes clear, there are a number of factors that can negatively impact retirement savings.
The good news: knowledge is power. Clients who are well-informed about how their decisions will impact savings can make plans and trade-offs. Here are four common obstacles to a successful retirement:
- The role of the rug rats. According to this Bloomberg story by Ben Steverman, kids can put a crimp in your clients’ retirement. From birth to age 18, the estimated tab per child is $233,610 for food, clothing, a larger house and a host of other expenses (and that doesn’t include university costs). Parents, he argues, must respond by honing their budgeting skills.
- The 30-something in the basement. The bad news: dependent offspring may live at home a lot longer than expected. Rob Carrick of the Globe and Mail notes that the newest retirement savings challenge is the 30-something who’s still on the parental dole. But Carrick argues this could be just another version of helicopter parenting – he suggests parents need to take their own goals and assets into consideration before ponying up.
- The slings and arrows of outrageous fortune. Diane Harris’s Next Avenue article looks at one of the most common source of anxiety for many people, namely the inability to absorb a financial shock. She makes the case that adverse events such as layoffs and leaky roofs are predictably common, so clients should come up with a plan to manage the unexpected.
- A reluctance to spend savings. Gordon Powers’s article in Investment Executive focuses in on the “consumption gap”; basically the difference between what clients could spend and what they do spend. His suggestions for helping clients achieve a more satisfying retirement include reframing their retirement in terms of income flow (rather than savings), and using annuities to provide sustainable cash flow without dipping into the principal.