When it comes to shortage solutions, we typically hear three main options – save more, spend less, or retire later. Working a couple more years rather than making lifestyle sacrifices to save more today or spend less tomorrow often sounds like the preferable option to clients. According to the 2013 Franklin Templeton “Retirement Income Strategies and Expectations (RISE)” survey, the top choice to solve for retirement shortages was to delay retirement.
“When asked what adjustment they would make if they were unable to retire as planned due to insufficient income, the top response was to delay retirement. However, one-third of today’s retirees surveyed were forced into retirement due to circumstances beyond their control, indicating that this strategy may not always be an option.”
For a majority of clients, delaying retirement is a viable solution, but clients need to be aware this option may not be fully in their control. Unforeseen circumstances could take this retirement shortfall fix off the table, leaving clients with no option other than spending less in retirement (or taking on too much risk on investments further reducing what is in the client’s control).
A majority of those surveyed that had not worked with an advisor were not sure how much of their income needs would be covered by Social Security, employer sponsored retirement plans and pensions in retirement. This information is critical to determine if they are on track for a successful retirement. Creating a written retirement plan increases your client’s awareness of their retirement situation and reduces stress by exploring their options if they are projected to outlive their money. Silver Financial Planner (shown below) and Easy Money both include calculated shortage solutions.
A combination of additional savings, reduced spending, and potentially delayed retirement would make for a balanced approach to retirement shortage solutions. The old saying “don’t put all your eggs in one basket” applies to more than investments!