Retirement Planning Strategies for Clients in Their 60s

Retirement is different for everyone. Some people want to travel, some want to help their children financially, while others plan to continue working on a part-time basis. Also, it is becoming the case more and more often that Americans are retiring with debt. This means that it is impossible for financial advisors to have a one-size-fits-all retirement plan for their entire client base. While each client’s financial situation is unique, the one aspect they all have in common without exception is that they need consistent income.

Transitioning from retirement savings to retirement income is not always easy (financially or emotionally) and that’s where the expert advice of a financial advisor becomes incredibly valuable. As a specialist, advisors can help clients increase income-producing investments in their retirement portfolios by maximizing retirement contributions during their working years and choosing investments that match each client’s goals. (For more, see: How to Advise Clients Who Are Behind on Retirement Savings.)

Here are four things to consider when it comes to retirement planning and investing for clients in their 60’s.

The investment goals for a client in their 60s are very different than a client in their 30s or 40s. Younger generations are focused on increasing the value of their accounts while current and soon-to-be retirees should be focused on preservation of capital. This comes from a combination of conservative investments and maintaining a realistic lifestyle.

Some clients may want to live life to the fullest and end up spending their money as quickly as possible. However, with life expectancies increasing, retirement savings also need to last longer. It’s better to live on less, with enough money to live comfortably and possibly leave a financial legacy to loved ones than it is to deplete savings early and worry about income for years to come.

While focusing on the preservation of capital, choosing the best investment strategy for each client’s needs and goals is of the utmost importance for financial advisors. For retirees, this usually means allocating a large percentage of their portfolio into income-producing, conservative investments. If a client retires at 65 they may need to live off their savings for 20 to 25 years or more, but at the same time they will have to use their savings as their main source of income.

Financial advisors need to help clients find the right balance between growth and income. This means they must consider a variety of factors such as the client’s risk tolerance, time horizon, investment knowledge, goals and the impact of interest rates. A client’s goals, retirement plan and income strategies should be reviewed on either a quarterly or yearly basis to ensure that investment options continue to stay on track. (For more, see: 5 Top Tips for Clients Retiring Within 5 Years.)

There are so many different types of investment options available to clients that they don’t need to pick just one. Of course, all investments should align with a retiree's comfort level in terms of risk, but the days of building a two-asset investment portfolio of guaranteed interest certificates of deposit and mutual funds are over.

Clients can now choose from several different alternative investments such as real estate, private equity, and managed futures, to name a few. When considering alternative investments for a client’s portfolio, keep in mind the associated expenses and risks. For example, a rental property can provide monthly income, but there are also expenses that come with being a landlord. Investing in private equity and similar assets includes high minimum investments and low liquidity.

While alternative investments provide diversification and a relatively low correlation to other asset classes like stocks and bonds, these expenses and risks need to be studied to make sure the investment is worthwhile for the individual client.

Clients may not want to think about what comes after retirement, but the truth is that estate planning is one of the most important parts of a financial plan for retirees. If they have not already, advisors should open the discussion and talk to clients about their personal and financial legacy. This can lead to the dividing of assets and preparing final costs such as taxes and funeral arrangements.

If clients don’t have enough savings to cover final costs advisors can open the door to a discussion about the benefits of purchasing life insurance. The older clients are, the higher premiums will be, but at least they can have the peace of mind that they won’t leave behind a financial burden for their loved ones after they’re gone.

The thing that advisors absolutely must do when helping their client’s plan for retirement, especially once they reach their 60’s, is to have open and honest discussions. Communication and expectations are key for all aspects of financial advising, but this is especially true when it comes to retirement planning, investing wisely and estate planning. (For more, see: Advisors: Have Clients Try on Retirement for Size.)