Planning Strategies for the New Retirement

How advisors are filling the defined-benefits void while guiding their clients safely through

By Sheila Stinson, CFP, and Douglas L. Wolford

Ms. Stinson is managing director of Convergent Wealth Advisors, in its Washington DC office. Her firm is a nationally recognized leader in wealth preservation for the high-net-worth market. Connect with her by e-mail: .
Mr. Wolford is CEO of Convergent Wealh Advisors. Connect with him by e-mail:

Sometime before the last Ice Age, when defined benefit pensions roamed the Earth, advising clients on retirement planning seemed much easier. Today, however, clients need either a very substantial war-chest or a very thoughtful strategy to ensure that they live well during their retirement years.

And with the number of those years increasing in lockstep with advances in medicine, even very wealthy clients cannot casually assume that their money will outlive them.
So let’s take a look at a thoughtful, logical process for helping clients prepare for their retirement years. Retirement planning is really more about life planning than it is about finance, and yet many advisors are less comfortable with these ‘softer’ aspects of retirement planning. So, before we dive into those factors, let’s start on more familiar turf – money.


Clients are often too busy working, raising children, and keeping up with the day-to-day to consider the specifics of their post-retirement life, let alone its cost. The simplest place to begin is to identify today’s known budget needs and the discretionary income left over after all the bills are paid. This is the basic ingredient in devising a plan to get ‘from here to there’. Generally, it is prudent to advise clients to look at any expected inheritance as a ‘bluebird’ and not a guarantee. It’s better for the plan to stand on its own and let any inheritance represent upside.


Having established a budget, but before launching into specific financial solutions, have clients take a step back and dream a little about how they want their life after work to look. What is important to them? Where do they want to live – a golf course in Florida, or traveling the globe? How do they want to spend their days? Do they want to pursue a second career that they have always dreamed about? Once a broad idea has been established, do some simple modeling to ensure that these desires will fit into the available budget already established.

Get Real

Now it’s time to explore the ‘softer’ side of life planning – perhaps the most important part of retirement planning. As previously mentioned, helping clients to live well in retirement is only part of the job. Advisors can help clients to live well throughout their lives, which is ultimately the best way to ensure a great retirement. Avoid the advisor’s tendency to take the easy route and skip ahead of the hard part to get to the ‘fun stuff’ – the investments.

Here are a few basic principles that clients will value learning from advisors, even if they ignored them from their parents:

I. Pay yourself first
A cliché, but a good guideline nonetheless. Saving and investing should be the first bill paid every month, not the last. Set a number and stick to it. Gently remind clients that neither they nor their advisor can control inflation, taxes, or investment returns – but they (the clients) can control spending. We live in a time when buying is always getting easier. One of the most important practices that clients can learn is to be mindful about spending – just because you can buy with ‘one click’ doesn’t mean you should. Sleep on major purchase decisions, and avoid impulsive spending or debt.

II. Be prepared for the unexpected
Jobs can be lost, disabilities can happen, even a vigorous young spouse can die. Goose the savings rate in high-earning years, just in case. Make sure that insurance policies are in place to create or protect an estate in case the worst happens.

III. Invest in jobs and relationships
The job market may change over the decades in which clients are preparing for retirement, so encourage them to invest time in keeping up with the skills required for continued employment and better earnings. Also, remaining happily married has proven health and financial benefits. Divorce is generally the biggest financial catastrophe that most clients – and subsequent generations – will ever face. Clients will recall with shivers of horror the dark days of 2008 and 2009, when diversified portfolios were down 30%, yet most of those portfolios have more than recovered from that terrible but temporary downturn. Divorce usually provides a permanent ‘haircut’ of 50% or more – not including legal costs, alimony, and a whole lot of heartache. To paraphrase Jerry Reed, someone else gets the gold mine, and you get the shaft.


Now it’s time to lay out how much money needs to be set aside between now and retirement to get from here to there. Generally it’s prudent to assume that the current level of spending, adjusted for inflation and taxes, will continue into the future – until the end of both spouses’ expected lives. True, most 85-year-olds are not taking round-the-world trips, but while the categories of spending may shift (into health and eldercare, for example), the old ‘rule’ that clients will need 80% of their pre-retirement income in retirement is oversimplifying. During this planning, consider all the sources of income a client may be receiving, such as Social Security, pensions, employment, trusts, and rental properties. Income that is subject to income tax should be used first to keep other funds invested and growing.

I. Set up a recurring savings amount
How much per week or per month is required to amass the requisite amount to outlast a client’s life? Adjust spending accordingly, or if income isn’t sufficient, it may be appropriate to suggest that clients obtain additional education, change employers, or pursue a new career. Advising clients on income can be even more impactful than advising on investing.

helping clients to live well in retirement is only part of the job. Advisors can help clients to live well throughout their lives, which is ultimately the best way to ensure a great retirement

II. Pay down debt
Pay down the highest-rate debt first, of course. Credit cards can be the instrument of the devil – clients should pay them off immediately. Restructure debt, refinance, and then split discretionary income into savings, debt repayment, and then (last) spending.
III. Determine what kinds of accounts to use
a. If clients work for an organization with a 401k or 403b plan, they should participate in it, contributing at least the pre-tax amount that is matched by the employer – the matching amount is free money.
b. If clients are self-employed, SEP IRAs are easy to set up and allow for easier contributions than traditional or Roth IRAs. (The contribution limit for traditional and Roth IRAs is $5,500 in 2015 or $6,500 if you are over age 50, compared to $53,000 for a SEP IRA.) Roths are attractive, particularly if a client’s income bracket is lower today than it may be in the future. Distributions from traditional and SEP IRAs will be taxed at ordinary income tax rates. Since it is challenging to predict the tax rates and bracket for a client in their retirement years compared to today, it is prudent to hedge one’s bets by investing in both a traditional and a Roth; while there is no income tax deduction for a Roth contribution, the account grows tax-free and there is no requirement to take mandatory distributions at age 70 ½, as exists with a traditional or SEP IRA.
c. Allocate client portfolios for growth and upon retirement the withdrawal of only a specific percentage annually (say, 3 or 4% after tax). Don’t plan for a specific amount of ‘income’ – the old ‘invest the principal and live off the income’ guideline is likely not going to cut it.
d. Plan asset allocations to align with clients’ goals and bucket the assets accordingly. Let’s assume a client has four retirement goals (in priority order): maintain lifestyle, travel extensively, give to charity, and leave an inheritance for the kids. (Such a list of client goals should be arranged in order from ‘must have’ at the top to ‘nice to have’ at the bottom.)

  • ‘Bucket one’ would include enough money in low risk assets or conservatively invested assets for preservation in order to maintain the basics of life – the ‘must have’ category – without touching any of the other funds.
  • The other three buckets are allocated with increasingly more aggressive strategies for growth – with the last goal in the list (the ‘nice to have’) invested most aggressively.

e. For some clients, purchasing an annuity with a portion of the portfolio to provide income for fixed expenses during retirement is another approach. The remainder of the portfolio can be invested in growth and income assets based on goals and risk tolerance.
f. There are many types of annuities, and it is crucial that clients understand the specific nuances and risks before purchasing this type of asset. It is also important to note that while some annuities do provide for tax deferral, they can have high expense levels that can eat into a client’s return. Consider establishing health and eldercare protection early in life. The healthcare landscape is not just changing; it has already changed. Clients should be looking at concierge medical practices, relationships with Accountable Care Organizations, and potentially a personal health trustee relationship to ensure considerate and competent care in their old age.
g. Keep working! Not necessarily at the same old salt mine, but part-time, or as a consultant, or at some ‘jobby’ that will provide enjoyment – but also some income. Continuing to stay engaged in the workforce keeps the mind sharp, and even a small amount of income will reduce the strain on a portfolio during market downturns. Think about this the next time a client asks for a financial plan to allow them to retire at age 50 or 55. Before jumping to the numbers, before digging into how much they need to save and how aggressively they need to invest, pursue another line of thinking and questioning. Ask them: What is driving your wish to retire early? Do you dislike your job or line of work? Do you feel there’s no time to pursue your passions? Advisors may serve this type of client much better by helping them design a life which allows them to find more fulfilling work that they can pursue vigorously and passionately many years beyond their ‘desired’ retirement age. While a job or career change later in life may decrease annual earnings, ultimately the client’s financial situation and overall quality of life are improved and enhanced over the long term by enjoying one’s work and life.


The final step in the process – really a continuing element – is to check in with clients frequently to assess the progress of their plans and refine or revisit if necessary. Advisors sometimes neglect to check in with the ‘low maintenance’ clients. Ironically, the high-maintenance client is often the one most likely to achieve his or her goals, because their goals are always kept top of mind and in front of their advisors. So make a special effort to check in with clients who don’t seek out advice, because conversely they may also be the clients drifting furthest from their plan.

Retirement can and should be some of the best years of a life well lived. Defined benefit plans may be a thing of the past, but advisors can step into the void these plans left behind. Today, advisors can and should be much more than investment experts – and have the opportunity and honor to become their clients’ confidants and counselors. Yes, this aspect can be the hardest part of the job, yet little is more rewarding than seeing clients achieve not only their financial goals, but all of their greater aspirations. In our own retired years, that’s something we can all look back on with justifiable pride. ♦