Help your client overcome the retiree’s dilemma

Help your client overcome the retiree’s dilemma

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Retirees are often forced to perform a tough balancing act. They’re torn between spending now at the risk of running out of money later versus conserving assets now even if that means leaving some money on the table.

How can your clients be confident they won’t run out of funds or leave too much of their savings unused?

Read: Clients’ top question: Have I saved enough?

That question is addressed in a white paper by Graham Westmacott, a portfolio manager at PWL in Waterloo, Ont. He suggests clients change from a rigid to a flexible annual withdrawal plan. He also says allocation to stocks should change according to portfolio performance and likely lifespan.

Westmacott calls this a dynamic strategy, which he showcases through this case study: for a couple with savings of $1.4 million, the strategy results in a 71% chance of having significant assets remaining at age 90, compared to an 11% chance with the constant withdrawal and allocation approach.

Read: Should you increase risk or lower return expectations?

“Allowing annual withdrawals and asset allocation to flex according to market conditions not only makes intuitive sense, but also reduces the risk of failure,” says Westmacott. Even better, clients value “a rational process that manages the risk of shortfall and is continuously updated throughout their retirement, with spending guidance along the way,” he says.

For more details, read the full white paper.

Also read:

Pre-retirees relying on homes to fund retirement

Canadians save, but not necessarily in RRSPs

Why most investors need goals-based investing

Take the pension or commuted value?

Focus on seniors evident in industry services and research

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Published at Fri, 06 Oct 2017 16:35:55 -0400