You probably already know most of your clients’ important financial numbers. Savvy financial professionals might even be casting a holistic vision for retirement, talking to their clients about issues like longevity, managing healthcare costs, or plans for their post-retirement living situation.
But do you and your clients know their individual retirement income gap and how they’re going to overcome it?
Failing to know the difference between their estimated retirement expenses and their expected sources of income could leave clients working well into their preferred retirement years.
As average life expectancy increases, knowing a client’s retirement income gap number takes on even more significance. And while income needs will likely change at different stages of life, estimating a client’s monthly expenses in retirement is the first step toward creating a strategy.
There are a number of economic factors clients should be aware of that can affect their budget in retirement. For instance, a rise in the age for full Social Security benefits may translate into less than expected income. Plus, lower interest rates can mean reduced returns on some types of investments — not to mention unpredictable changes in tax rates.
They should also be aware that their expenses will likely differ from their current monthly expenses. Items such as commuting costs may decrease while others like travel, recreation, and hobbies may increase. Inflation could also cause their monthly expenses to increase over time.
Even with all these factors, it is possible to help clients estimate their expenses for when they retire. Share our retirement budget worksheet with your clients to help determine whether they might have a retirement income gap. They can use this worksheet to determine the extra monthly income they may need in retirement to create the kind of golden years they want.
If clients have estimated their retirement income gap on their own, review their worksheet and see if it requires any refining. If there is a gap, you can start discussing the many ways to close it, and prepare a long-term strategy that’ll work best for them.
Share our retirement budget worksheet with your clients today to help them determine their retirement income gap.