Accounting Professionals


How To Help Your Clients With Retirement

3 Minute Read

How To Help Your Clients With Retirement



How to help your clients with retirement

After your clients spent their entire professional careers diligently saving up for the day they’ll leave their offices or career, it’s essential you help set them up for the next phase of their lives: retirement. While it may be challenging for them to flip the switch when it comes to not working, your advice can help ensure your clients’ financial future doesn’t remain compromised into retirement. 

Here’s what you need to know about helping your clients with retirement

Help them achieve flexible spending

Most individuals struggle with underspending when they enter retirement. Helping your clients understand flexible spending will mean they can manage their retirement without worrying about burning through the money they saved up. For almost 25 years, financial advisers and customers have utilized the 4% rule to assist them walk this fine line. Historical situations reveal that if retirees follow the 4% rule, they seldom touch their principal, implying that they may not be getting the most out of retirement.

While the 4 percent guideline suggests that customers remove the same amount each year (adjusted for inflation), it's crucial to remember that spending demands change during retirement. According to some experts, retirement is now divided into three stages: go-go, slow-go, and no-go. The first phase is often the most active, with retirees embracing activities such as travel and hobbies. The second stage occurs when their speed slows, and the third occurs when their medical bills exceed their spending in other areas of their life, like restaurants. Considering these various stages can assist financial planners in ensuring that their clients do not regret losing out on experiences early in their retirement due to concerns about overpaying.

Managing investment accounts

Liquidating investment accounts may be difficult, necessitating careful computations and examination. When done appropriately, this change might significantly benefit your clients. How you proceed, as with other planning challenges, will be determined by the sorts of accounts they have, client spending demands, and the age of your retiring customers.

A traditional technique involves determining which after-tax assets should be liquidated first, followed by tax-deferred funds such as IRAs and 401(k) plans. Unfortunately, if a retiree waits too long to withdraw from their IRA, they may find themselves in a higher tax rate when required minimum distributions become due. If your client decides to use taxable funds first, consider converting a Roth IRA to lower tax brackets simultaneously.

Wrapping things up

It’s important you help your clients understand how to keep themselves financially afloat through retirement. These are individuals who spent much of their professional lives working with you to ensure their finances are in a healthy state. They may continue to retain your services into retirement. It’s important that you provide them with the guidance they need as retirement is the endgame they were looking for when their careers first began. By helping them understand how to spend flexibly, you can ensure they are happy for years to come. With your knowledge of how investments are taxed, you can prevent them from encountering situations in which they find themselves draining their savings. 

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June 15, 2022


Luis Rivero, CPA

Luis Rivero, CPA


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