The first step for clients is to determine exactly how their monthly cash flow is utilized. Few people take the time to track their expenses.
As economic storm clouds swirl with rising inflation and a potential recession looming, advisors are getting anxious questions from clients about their retirement dreams.
Raising the question, “Is $1 million enough for retirement?” can be the icebreaker to not only address their fears, but also create a new and better roadmap for retirement.
A recent study published by the Transamerica Center for Retirement Studies reported that most people believe they can retire comfortably on substantially less than $1 million. About half of millennials believe that $300,000 is sufficient. Meanwhile, baby boomers had more realistic expectations, estimating the need for retirement savings to be around $750,000. Yet the median savings among boomers is only about $200,000. All respondents surveyed in November 2020 reported similar challenges accumulating these sums, including the impact of the pandemic, where women and minorities were especially affected.
Long-held advice is that a client who has accumulated $1 million would be able to live comfortably for the remainder of their life. However, the median net worth of an American is just under $121,760, according to Federal Reserve data. This figure varies greatly by age, race and education level, and even the best savers are still woefully under the desired $1 million benchmark. A great chasm exists for many Americans to invest enough, especially during challenging economic times. This makes a conversation about inflation even more timely and invaluable for advisors to raise now. Here are a few ways advisors can broach the topic with clients and improve their retirement planning.
- How to help clients know where they stand.
- Budget busters that impact saving success.
- Bringing children into the conversation.
- Engaging expert advice.