Let’s get a few ideas out into the open immediately — ideas that are at odds with most generally agree- upon principles of financial planning and of portfolio management.
First, when your clients retire, they will need less capital than you may have been telling them.
Second, their annual income needs will fluctuate along with their personal situation, with the economy, with age and with health.
Third, they may live longer than you think.
Fourth, recognize that financial models used to design portfolios are cartoons. Follow them at your peril.
Fifth, the key assumption of most retirement planning tools — a 4 percent rate of return — is a target designed in the laboratory of academia. It bears no relationship to the real world. It is an artificial construct, a shibboleth. Ignore it.
Sixth, challenges that your client faces are strategically and tactically different from those a portfolio manager faces.
Seventh, simple approaches to retirement issues are fine, just fine.
Eighth, we need to listen to our heads, hearts and stomachs during retirement, in no particular order. Each will have its time to prevail and its time for quiet.
These eight challenges are presented as opportunities to the client. Take full advantage of these ennobling and enriching ideas. They will not only free your client to enjoy a comfortable retirement, they will also free you from the rigorous application of silly rules that have no relationship to the real world.
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