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The Best Day To Start Retirement Planning Was Yesterday

“What is your distribution plan for retirement”?

This question will likely be met with one of three possible answers. The first, and most likely response, is silence followed by the client asking you what a distribution plan is. The second is simply, we don’t have one. The last will be the client trying to remember what their broker has been telling them all along.

Let’s talk about the first two. You will need to educate your client on what a distribution plan is. A distribution plan is the most important thing you need before you retire. This is the plan for how you are going to take your nest egg (your 401k, IRA, CD’s any asset that you are going to use in retirement) and turn it into an income stream for life. We talk in our seminars about the importance of first having a plan to accumulate wealth during our working years, but once you retire your focus needs to change to distributing that wealth back to you in the form of reliable income. These plans cannot be the same; they will use different tools and strategies.

The distribution plan must be deeper than simply taking withdrawals; it must account for: how this income stream will last for a lifetime; how it will be affected by inflation and market risk; how it will protect against LTC costs and rising health care costs; how you will overcome unseen emergencies when you need liquidity; and how to pass on money efficiently to your beneficiaries. Once your client understands what a distribution plan is and realizes they do not have one they will want to know what your strategies are for them. They will realize that they need your help!

For the clients that think they have a plan through a current advisor, you’ll need to ask a good follow-up question like: What has your advisor showed you that will change in your portfolio once you retire? You must make it clear that the already-established portfolio they have before retirement cannot be the same one they need after they retire. Just keeping the same assets and simply taking a withdrawal every year is not a distribution plan. Ask them how their current strategy is accounting for longevity, inflation, and market risk… They most likely will not have those answers, but we do.

I encourage you to try these questions with your next five clients and see what the results are. We know that these clients need our help; now it is our responsibility to ask them the questions they need to hear so we can do just that. Help.