by Doug Dahmer, EmeritusFinancial.com
Special to the Financial Independence Hub
Retirement Income Specialists are a very rare breed of financial planner. So rare, in fact, that to date, the vast majority of North Americans are unaware of their existence and consequently very few have benefitted from the valuable, and much needed, services they provide.
This new specialized category of financial advisor is at the leading edge of strategically assisting North Americans to convert their accumulated retirement nest egg into a reliable and sustainable income stream.
Long-lived boomers face greater saving challenge
The challenges are not for the faint of heart. With baby boomers living longer, the years to be funded have increased significantly. There is no clear path to follow, as baby boomers are redefining retirement in terms of both planned activity level and their desire to slowly transition out of active employment.
Most importantly, baby boomers represent the first generation where the vast majority will be left to their own devices to cobble together a process to fund their lifestyle after work ends. Their parents and grandparents enjoyed the luxury of company-sponsored pension plans where talented, disciplined pension plan managers assumed the daunting responsibilities. Never before have there been so many people left to their own devices to fund their life after work.
When employment income ends for baby boomers, their desired lifestyles will need to be funded by a mixture of government retirement benefits and a drawdown of accumulated savings. The lifetime guaranteed pension income their parents enjoyed is a security blanket that will be sorely missed. Unfortunately, this is a reality to which many people are just now waking up. Retirement Income Specialists have stepped in to fill this void of responsibility.
Planning for Go-Go, Slow-Go and No-Go Years
Baby Boomers now face a minefield of new costly dangers to avoid, but also an abundance of previously unavailable opportunities to enjoy. One particular advantage will be their ability to custom design their income stream to match their progression through the varying spending levels of their Go-Go Years, their Slow-Go Years and their No-Go Years. They will also enjoy enhanced opportunities to take advantage of tax planning opportunities.
The job of a Retirement Income Specialist is to help their clients avoid the unforeseen pitfalls and to uncover and take advantage of the opportunities available.
Successful Retirement Income Specialists have developed and diligently follow a proven process. This is assisted by powerful projection tools that allow them to properly organize the details of your desired future, to ultimately arm you with the right information to make optimal decisions. They also incorporate the success rules that pension-plan managers integrated into their institutional approach to money management.
Focusing on variables you can control
The job of a Retirement Income Specialist is to get you to focus upon the variables you can control. In other words, when to initiate retirement benefits to maximize your entitlements, where to source your needed cash flow to ensure you minimize the taxes you pay and ultimately allowing you to explore your possible life choices and design a lifestyle that can comfortably and confidently funded.
Their job is also to put protective mechanisms in place to protect you against the things that are beyond your control – be that the volatility of investment markets, changes to government legislation, or the unpredictability of your own longevity. In other words, to stress test your plan.
In the run up to, and once retirement begins, the financial stakes are high. The difference between the right and wrong decision can add up to hundreds of thousands of dollars.
Conventional wisdom no longer applies
An everchanging landscape of rules means the conventional wisdom relied upon by previous generations no longer applies. The implications of following readily available but seriously outdated guidance are severe. Unfortunately in retirement there are no undo or redo buttons. Those who make wrong decisions will spend the rest of their lives looking back in regret at the implications of less-than-optimal decisions.
I continue to be amazed by the tremendous lack of knowledge amongst the vast majority of advisors of how to transition their clients from their accumulation phase (saving years) through their decumulation phase (spending). But then again, why should we be surprised? Their employers, the large corporations within the Canadian financial services industry, want to keep their employees focused on serving those who are continuing to add to their existing savings.
Consequently, very little has been invested in ensuring their advisors are properly trained, and have access to the necessary tools and financial products needed to service the needs of those looking to repatriate their money.
Though their intent remains good, the advice provided by those who focus upon the needs of the savers, too frequently leads to unintended consequences that cause irreparable damage as clients transition to the spending years:
- Tax Deferrals turn into damaging Tax Traps.
- Dollar Cost Averaging reverts to Dollar Cost Ravaging.
- Poorly informed decisions lead to hundreds of thousands of eligible dollars being unintentionally left on the table.
Let me be blunt: spending your retirement nest egg simply isn’t as easy as putting your savings plan in reverse. Strategies you grew to rely upon during your saving years turn on their head and work against you during your spending years.
Fortunately, it’s never too early or too late to explore the necessity of adopting different thinking when the flow of funds reverses (transitioning from saving to spending).
I beseech you to invest the time to meet and talk to a Retirement Income Specialist. I promise you it will take you less than 30 minutes to come to understand the significant difference between advisors who focus upon the accumulation phase versus those who specialize in retirement income planning.
Only with this firsthand knowledge will you have the information you require to distinguish between the right decision and the wrong decision of whose guidance you should be relying upon as you approach your critical drawdown years.
Doug Dahmer, CFP, is founder and CEO of Emeritus Retirement Income Specialists. With offices in Toronto and Burlington, Emeritus’ C3 process is one of the industry’s most comprehensive retirement planning processes.