3 factors to include in any retirement income conversation

By 2030, all baby boomers in the U.S. will be 65 or older. Given economic changes, market volatility and health care costs, some people’s future financial security may be at risk. How are you ready to help?

At this historical period when all baby boomers are old enough to retire, some people may need to fine-tune their long-term financial strategy to account for changes in the economy, rising health care costs, market volatility and a potentially longer-than-expected retirement. You can lead the charge in helping your clients shift to a financial strategy that can help them to retire with confidence.

Assessing retirement readiness with these factors in mind

As you evaluate a client’s financial readiness to retire, you may try leading the conversation with these three factors:

1. Retirement’s rising costs

For most people, funding a comfortable retirement falls on their shoulders. With fewer pension plans and higher costs of living, retirement income for 2 in 5 working households may fall short. In other words, they won’t have enough money to maintain their pre-retirement standard of living. Unfortunately, Social Security alone may not be enough to supplement their other income sources.

By asking clients these questions, you may be able to create a strategy that helps their money keep up with rising costs in retirement.

Q. Do you want to stay in your own home, downsize or move somewhere different?

Keep in mind: Taxes and maintenance costs may rise over time, so the amount budgeted to stay in a home today will likely be different in the future. Downsizing may lower monthly mortgage payments, taxes and other costs of home ownership (depending on location and the housing market). So, a move and the costs that go with it may be a financial strategy worth discussing with clients.

Q. What are your planned expenses, including mortgage, monthly bills, taxes, etc., in retirement?

Keep in mind: Housing costs can eat up a significant portion of a monthly budget. For some retirees who plan to stay in place, their mortgage will be paid off, removing a large monthly expense. But for others, a housing payment will be part of their budget, along with other monthly bills, taxes and retirement expenses.

Q. Is there plenty of wiggle room in your budget right now or is it stretched?

Keep in mind: Some costs in retirement, like health care costs, are beyond our control, and they could put a big drain on retirement. “We must take into consideration current expenses, as well as future costs, even when we can only guess at how much we will need in retirement,” explains Rod Mims, SVP of Retail Sales at Athene.

When clients budget for retirement, make sure they account for inflation to help them cover future planned and unexpected expenses. Sharing this retirement budgeting worksheet with your clients can help them plan for the retirement they want and compare their needs, wants and wishes with their expected income.

2. Planning for a lengthy retirement

Along with rising taxes and inflation, it’s projected that, on average, 65-year-old men will live to age 82 and 65-year-old women will live to age 85. With life expectancy climbing and health care advancements, many people could easily outlive the projections, making for a longer-than-planned retirement. By living longer, a retiree’s money may not last as long as expected if there’s a significant gap between income and expenses when entering retirement.

Besides a longer retirement, some retirees want a more active, fulfilling lifestyle, unlike previous generations that may have considered retirement as a time to slow down. According to the latest figures, Americans ages 65 and over participated in leisure and sports activities for over 7 hours a day, on average. 

Even the way clients approach retirement conversations with their financial professional may be different. In the past, those discussions may have focused on how much monthly income clients thought they would need to maintain their standard of living. Now, after a decades-long career, retirees may need more money to pursue their passions.

Keep in mind: A retirement income strategy conversation must:

• Go beyond how much money clients think they’ll need on the day they retire
• Factor in the costs of a long, active retirement
• Discuss all retirement income sources so your clients can retire to their best life
• Inspire clients to think about their “future selves”
  • Ideas and tips in our Building Client Confidence Toolkit can help.

 3. The benefits of a diversified portfolio

Several factors may put financial security for some retirees at risk. A diversified portfolio is crucial in helping your clients enjoy retirement rather than just survive it. For example, when there’s a balance of stocks, bonds, commodities and fixed income solutions, different areas can help offset a loss when one or more declines during volatile market conditions.

Products like fixed indexed annuities (FIAs) and registered index-linked annuities (RILAs) could play an important role in a client’s financial strategy. How? They can both help manage risks, offer growth potential and create their own sort of retirement paycheck that provides a guaranteed lifetime income stream to help cover expenses.

Keep in mind:

• With a FIA’s zero floor, your client will never earn less than 0 percent interest, even if the market goes down. Many FIAs also offer optional lifetime income riders.
• RILAs provide a level of protection, up to a buffer rate or beyond a floor rate, that shields a portion of a client’s retirement savings from loss.
• Among retired and near-retired survey respondents, 74 percent who own an annuity are confident they will have enough money in retirement, unlike 62 percent of respondents who don’t own one. (Based on results from our joint survey with Kiplinger)

Lead the charge — help clients reach their goals for a remarkable retirement

Recent findings from our joint survey with Forbes revealed that 90 percent of respondents work with a financial professional to some degree. Survey participants also provided insights into certain aspects of their interactions with financial professionals, including trustworthiness, integrity, financial knowledge and expertise. Respondents rated all four aspects “overwhelmingly positive.”*

With a surge of new retirees leaving the workforce in the next few years, some people may feel uncertain about their future financial security. Others may not know what steps to take. If any of your clients feel this way, you can help them rethink how to save for retirement and address potential income gaps after looking at their future income sources like Social Security, pensions or personal savings.

With your expertise and retirement product lineup, you can help make a difference in your clients’ lives. In addition to these tips, our Retirement Risks Toolkit and Understanding Consumer Behaviors Toolkit are full of valuable tools and resources that can help enhance your interactions.  

Insights on Athene Connect. Tips, tools and resources to grow your business by helping clients retire with confidence.

*Methodology: Forbes Insights surveyed 1,001 U.S.-based respondents aged 45 or older who were retired (46%) or were nearing retirement (54%). The poll was conducted from October 27 to November 16, 2023.