Three Ideas Keeping Clients from Saving and How Advisors Can Address Them

The American College of Financial Services
February 25, 2020

Talking to clients about saving for retirement can be a bit like trying to convince your grandparents to use the internet. For many, putting money aside for the future--much like learning a new piece of technology--just doesn’t seem necessary. It’s also scary, and that’s because the issues at play are so complex. And it isn’t just an issue for the aging--more and more young people today are working multiple part-time or low-wage jobs, often without the benefit of a 401(k) or comparable plan, and don’t think they can afford to take money they need now out of their pocket for some hazy future date. However, as a responsible financial advisor, convincing your clients to start saving up for retirement now is one of the best things you can do, and the right time to start saving is always “right now.” To do this effectively, however, it’s important to understand their concerns.

Let’s take a look at some of the most common client objections to saving and how to deal with them.

 

#1. “I’ve got Social Security. I’ll be fine.”

 

Everyone in the U.S. is eligible for Social Security benefits when they reach a certain age (currently around 66-67 years old). Clients spend their entire lives paying into the program via payroll taxes, and now it’s their turn for the system to work for them. What many don’t realize, though, is that a perfect storm is forming in the retirement zone. More and more baby boomers, to the tune of millions every year, are retiring and collecting Social Security checks. According to The American College of Financial Services’ 2019 Social Security survey taken by 245 financial advisors with the Retirement Income Certified Professional® (RICP®) designation, two-thirds (67 percent) of RICP®-holding financial advisors with older clients say those clients are at least moderately worried that the Social Security program will cut benefits in the future.

Even ignoring this, Social Security may not be as helpful as your clients think. On average, it only covers about 40 percent of people’s cost of living after they’re stopped regularly working. In the past, generous company pensions helped supplement Social Security income, but fewer and fewer employers are offering pension plans because they too are losing money on them. All the while, natural inflation causes costs of living to continue to rise. So if your clients are betting on Social Security to allow them to coast through their retirement years, they may need to think again.

 

2. “But I need that money now.”

 

Many millennials are gravitating more and more toward the so-called “gig” economy, working freelance jobs that may not make as much and require other sources of income to supplement. Other older individuals may find themselves having to work multiple low-wage jobs just to make ends meet. Often, these sorts of jobs preclude having access to 401(k)s and other automatic retirement savings options, but new legislation like the recent SECURE Act could change that. Still, there are misconceptions here about saving for retirement that you as an advisor need to address.

The feeling of taking money out of your own pocket now and going without what you want or need to benefit a future self somewhere down the road isn’t always an attractive one, so you need to show your clients that saving up doesn’t have to be big. If a client has access to a 401(k) or comparable plan through an employer, this is made easier.

Even if your clients don’t use a 401(k) to save up, simply putting money aside in a separate bank account to save has its benefits. Not only is it separate from their main income and tempts them to spend it less, but interest will start accruing on the saved money, meaning they’ll have more than what they started with through no work of their own. Granted, standard interest accumulates very slowly, even though it compounds on what came before in ever-increasing amounts--all the more reason to start saving as soon as possible.

 

#3. “I’ve still got plenty of time to save up later.”

 

Everyone tends to think they still have time to save up for retirement--until retirement is upon them. The biggest problem with this idea is that these days, people are overall living much longer than they used to. While this is obviously a good thing, it’s also bad news for people whose retirement savings may be on shaky ground. Depending on how long they live, they’ll need more money to pay their bills, and therefore will need more saved up to make sure they can maintain the standard of living they’re used to.

The longer your clients wait to start saving for retirement, the more pain they’ll feel on their wallet. Setting aside money as early as possible through 401(k) plans, annuities, and other methods is the best way to make sure the burden is spread out over a longer period of time and doesn’t impact spending as much. Many people gain more and more financial responsibilities as they get older, including home mortgages, student loans, and car payments, that may not be present when they’re younger, giving them more disposable income. The moral of the story is, the sooner your clients can start putting money aside--even if it’s just a small amount--the better off they’ll be in the long run.

While many advisors don’t have the specialized knowledge they need to develop financial plans that take into account a client’s individual retirement needs, situation, and desires, you can gain that knowledge through advanced education. In particular, the Retirement Income Certified Professional® (RICP®) designation program offered by The American College of Financial Services will provide you with the high-level skills and expertise you need to do more than simply help your clients save. With the RICP®, you can help them thrive throughout their retirement.

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Baby Boomers are retiring at an unprecedented rate, meaning that more and more Americans are facing the challenge of using their investments to maintain their quality of life. For them, the usual investment advice no longer applies. They need the unique strategies you can learn through the three-course Retirement Income Certified Professional® (RICP®) designation program. Help your clients thrive while growing your career.

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