Clients Have Money. They’re Just Not Sure What to Do with It in Retirement

Clients thought saving money was the hard part. They should try spending it.

Retirement is supposed to be the reward for decades of work. But with so much time, energy and, of course, money going into preparing for retirement, a lot of people come out on the other side asking, “Now, what?” Fewer than a third of pre-retirees aged 55 and older actually have a decumulation plan for how they’ll withdraw money in retirement, according to a survey from Corebridge Financial. 

Advisors can play a pivotal role, helping clients overcome the anxieties that often linger long after their working years are over. “Even when a client has saved well, spending from the portfolio can feel very different than adding to it,” said Dwight Dettloff, founder of Winding Trail Financial Planning. “It’s less about telling clients, ‘You can spend more,’ and more about giving them a framework, or map, that helps them feel comfortable.”

Where’s the Treasure Map?

For many retirees, income becomes far more complicated than the bi-weekly paychecks they relied on during their careers. It may come from Social Security, defined contribution plans, pensions, annuities, investment accounts and even rental properties. That complexity can be overwhelming, Dettloff told Retirement Upside. “From there, we can start thinking about how to best use those resources together to create a new retirement paycheck,” he said, adding that he revisits withdrawal strategies with clients at least annually.

The Corebridge survey found:

• Just 14% of retirees have a detailed strategy for managing required minimum distributions.
• Only 31% of people ages 45 to 79 even know what the term “decumulation” means.
• A quarter of retirees align income sources to specific expenses. 

X Marks the Spot. That’s an issue Jim Crider, founder of Intentional Living Financial Planning, likes to address early. “Before we talk withdrawal rates, we build a statement of financial purpose, one sentence that captures what the money is actually for,” he told Retirement Upside. “The questions matter more than the math here.” He asks clients what their ideal year would look like, where would they go, who would join them, and what’s something that they used to love but haven’t done in years. “You learn more from those answers than from any risk questionnaire.”