What you need to know
- Our clients know they can work past the age of 65.
- Retirement income is often taxable.
- New clients need to know that too.
Suppose your client doesn’t have enough savings for retirement.
Research shows that the average American has $95,776 saved for retirement, and one in three Americans has no retirement savings.
If this sounds like your typical new client situation, consider recommending a few options, such as a job after retirement, a smaller home, or deferring claims for Social Security benefits.
You also need to make sure your clients are aware of the potential costs of nursing and long-term care, even if it scares them.
You may need to educate your customers about the need to adjust savings withdrawal rates as they get older.
With your support, careful planning, and the determination to commit to planning, they can ensure a comfortable retirement.
Of course, one important consideration is the goal. Retirement can mean many different things to people.
For some clients, it will be travel and spending time with family. For others, it’s time to start a new business or start a philanthropy.
Regardless of what approach your client intends to pursue, here are nine things that might surprise them when it comes to retirement.
1. There is no age limit for retirement.
In the past, many people retired at about 65 years old, but recently retirement has become common.
In fact, there is no age limit when a client retires.
They can retire at any age, as long as the client has the financial means to do so.
2. Retirement income may be taxable.
Depending on the type of account, clients may be required to pay taxes on their retirement income.
If the client has a traditional IRA, they may be obligated to pay taxes on the money they withdraw upon retirement based on their gross income.
If you have a Roth IRA, there is no tax on the money you withdraw.
For you, this is probably old news. For new clients, this may come as a shock.
3. You may need to adjust your withdrawal rate.
The 65+ population is the fastest growing age group in the United States, growing 34.2% over the past decade.
The percentage of money you can safely withdraw from your retirement account each year depends on several factors, including the size of your nest egg and your expected lifespan.
However, as a general rule, you should not exceed 4% of the eggs in your nest each year.
4. You should consider deferring Social Security.
Some new clients may dream of retiring as soon as possible and claiming Social Security benefits, but will receive reduced benefits when they start receiving Social Security benefits at age 62. .
For example, suppose your full retirement age is 67 and you start receiving your benefits at age 62. Of the monthly benefits she receives only 70%.
If you don’t start collecting until age 70, you will receive 132% of your monthly benefits.
The average Social Security retirement benefit is $1,536 a month, about $19,000 a year.
The maximum amount of Social Security benefits that a person retiring at full retirement age in 2020 can receive is $3,345 a month or $39,000 a year.
5. Don’t forget the cost of the nursing home.
Most health insurance plans do not cover long-term care costs, such as nursing home costs.
