Client retiring unexpectedly? what to do

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According to the Employee Benefit Research Institute Retirement Confidence Survey for 2014, some 49% of Americans “find themselves retiring unexpectedly.” The reasons for such outcomes include health problems, disability, downsizing and spousal-care demands.

How do financial planners best help clients in this situation refashion retirement-income projections and plans?

“When that happens, there is a lot of emotion involved,” says Kristine Hartland at Largo, Fla.-based Peace Wealth Management. Typically, those suddenly retired clients in the immediate aftermath, “don’t feel like they have enough,” she says.


Her go-to response: Get more aggressive investing the clients’ retirement assets, but she does so by refocusing on fixed-income products such as bonds with an objective of creating more income distributions.

“It’s not time to take on more risk adding equity; you are not rebalancing the portfolio but you are shifting from growth goals to income goals. I call it re-optimizing,” Hartland explains.

For example, she may exchange a client’s certificates of deposit for short-term bonds. In a worst case, if a retirement-income projection points only a shortfall, Hartland considers having the client invest in single-premium annuities. “I don’t want to see them run out of money before the end of their life,” Hartland says.


Roger Kruse, who owns FFP Wealth Management, a Minneapolis-based firm, says frequently clients hovering around the age of 60 have gotten an offer to exit their job prior to their planned retirement age, an offer they believe they “have to take”—or face certain termination anyway.

Kruse prefers “retrenchment” as his watchword when he speaks with clients facing such circumstances and addressing their resulting retirement-income situation.

Kruse starts by seeking ways such clients might cut expenses. But he also considers if he should advise them to take distributions from their retirement accounts, even more than 4% annually if necessary. Sometimes, those steps are necessary to stave off dipping into Social Security benefits before 70 and losing out forever on a higher pay out from the government.

Kruse also emphasizes for the unexpectedly-early retirees the good news about their income situation: Their money will stretch farther. Why? They will, as a result of no longer working, receive an immediate and automatic reduction to their tax bill, since they no longer will pay a payroll tax, and, most likely, their income dropping will place them into a lower-income tax bracket, he says.

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.

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