Retirement Planning is About More than Saving

Saving money for the future is one of the cornerstones of smart financial strategy, but when it comes to retirement planning, it may not be enough for your clients. Many people simply aren’t saving, and those that are may not have enough to secure the type of retirement they desire.

The need for increased savings is growing

Americans are living longer lives than ever. While this is generally considered a good thing, it can also lead to numerous complications for your clients. Put simply, a longer life means your client will require more money in order to secure a comfortable post-work lifestyle.

Meanwhile, jobs that offer lifetime pensions are now quite rare, as most businesses have opted for personal retirement accounts, such as 401(k)s and IRAs.

Additionally, Social Security is not designed to be the primary source of income for retirees. And with the government program buckling under the weight of a growing number of seniors, relying on Social Security as a financial safety net has become a precarious endeavor.

Many Americans not putting enough away

There’s been no shortage of studies in recent years showing just how many Americans are failing to save for the future.

For example, Wells Fargo reported this year that 41 percent of middle-class Americans between the ages of 50 and 59 are not currently saving for retirement. Meanwhile, 19 percent of all respondents in the Wells Fargo study said they have no retirement savings at all.

shutterstock_149160512“Saving for retirement isn’t easy,” said Joe Ready, director of institutional retirement and trust at the financial institution. “It requires sacrifice, and it’s not something people can push off and hope to achieve later in life.  If people in their 20s, 30s or 40s aren’t saving today, they are losing the benefit of time compounding the value of their money.  That growth can’t be made up later, so people have to commit early in life to make savings a regular discipline year after year – it is the only way most people will achieve their financial goals to carry them through retirement.”

This data is supported by a recent poll from Bankrate, which showed more than a third of adults have not started saving for retirement yet. Surprisingly, more than a quarter of individuals between the ages of 50 and 69 have not yet begun to save.

Individuals unsure of how much money they need in retirement

Even those who have begun to save are not feeling terribly confident, according to a 2013 study from the Employee Benefit Research Institute. Part of this has to do with the fact that many Americans have not taken their specific circumstances into account, and therefore don’t truly know how much money they’ll need to secure the retirement they desire.

Only 46 percent report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement,” the EBRI stated.

High-net-worth individuals have a head start

There is positive news regarding high-net-worth individuals, however. Data from the National Institute on Retirement Security shows that households with more wealth tend to have more retirement savings put away when compared to other segments of the population.

“Account ownership rates are closely correlated with income and wealth,” the NIRS stated. “More than 38 million working-age households (45 percent) do not own any retirement account assets, whether in an employer-sponsored 401(k) type plan or an IRA. Households that do own retirement accounts have significantly higher income and wealth – more than double the income and five times the non-retirement assets – than households that do not own a retirement account.”

While this is welcome news, it’s important for these individuals to recognize that greater wealth can also lead to increased complications. After all, high-net-worth individuals typically have more financial obligations than their lower-income counterparts, meaning the money they require for a comfortable retirement will likely be that much more.

Additionally, a larger nest egg often requires greater expertise, making it essential for high-net-worth individuals to seek out help from financial planners.

Helping clients reach their goals

As a financial planner, it’s your job to help your clients achieve their retirement planning objectives. However, saving is only a small part of that. While putting money away for the future is smart, it will not result in the high returns most individuals want and need for their post-work years. Fortunately, you’re in an ideal position to explain how different investment vehicles can assist in this regard.

From stocks and bonds to fixed annuities, your expertise and guidance can help clients reach their retirement goals regardless of how much money they have saved.

Also, you can point out how certain products, such as permanent life insurance and long-term care coverage, can help generate income, reduce future costs and make other financial necessities, such as estate planning, that much easier to master.

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