A process to ease plan participants into retirement

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As employee benefit advisers, financial advisers and insurance agents, our job is to help employees prepare for a financially secure retirement as seamlessly as possible. For plan sponsors, this also includes setting up plan participants to be in a retirement-ready position. Several years ago, I began to develop my own process to ease my clients into retirement, which I refer to with the acronym EASE. This process allows individuals to explore a full range of options and lifestyle choices prior to and during retirement, while still holding full control in order to achieve the retirement they choose.

Step one: envision
The best way to think about this step is as a combination of life planning coupled with preliminary discussions about the economic aspects of retirement planning. It is important to quantify the employees’ visions of retire­ment before focusing on how their assets, income sources and expenses fit into a work-sponsored retirement plan. What I have found is that most clients have not gone through this process for what is probably going to be one of the most important decisions in their lives.

In order to open up the conversation with people about income distribution, I use a pyramid image to present a visual concept for employees on how we think about categorizing expenses and linking them to assets and income sources. Plan participants tend to retain images more than narrative.

Step two: analyze
This step is by far where I spend the most time in the process. What makes this part unique is that I use sophisticated software that helps create graphics and image-based interactive experience for my clients, with an emphasis on interaction. It is the most powerful part of the process, since it is done live with the employees. In other words, they get to participate, as opposed to being “presented to.” The results and employee affirmations over the years have reinforced that the approach is not only unique, but meaningful in helping lead clients to action. It is truly a collaborative event.

We also play multiple “what-if” scenarios with the employee after we discuss the Seven Optional Solutions (SOS). SOS explains which variables can be adjusted or action that can be taken if shortfalls exist in a participant’s plan. There are many solutions for an employee to achieve success in their plan, it is just a matter of selecting the appropriate, customized choices that meet their needs. The Seven Optional Solutions include:

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  1. Work longer
  2. Die sooner
  3. Spend less
  4. Save more/defer benefits
  5. Change rate of return
  6. Adjust inflation assumptions
  7. A combination of all six

Step three: solutions
Ultimately, every plan participant seeks a solution, which can only be determined through the first two steps. However, when they are presented as a result during earlier steps, they are almost universally accepted without objection because the employee appreciates and understands how I arrived at my recommendations. Referencing back to the SOS model, not all solutions are product centric. Many times just working an extra year or two satisfies the shortfalls that a client might see later in their retirement. I have found that a good rule of thumb for most people is that working one extra year with some type of savings plan takes care of three years of expenses in retire­ment. This is due to the rules of compound growth and the fact that it is one more year that savings is not being drawn down. Both of these things together have an exponential effect in long-term planning.

Many times I discuss the option of phasing into retirement with part-time employment. This can be very beneficial to the overall retirement plan, as it provides income for “joy expenses,” such as vacations. I find that many people never even consider this option, because to most retirement is black or white. In reality, it is a thousand shades of gray. Discussing these options with plan participants will allow them to feel more comfortable and confident in their retirement plans.

Step four: evaluate
This is the glue that really holds the plan together long term. When it comes to the evaluate step of the EASE process, I believe the following:

  • Income distribution is not a one-time event, but rather an ongoing process that should occur, at a minimum, on an annual basis.
  • Current projections many years into the future are going to be inaccurate.
  • By creating an ongoing annual evaluation process, we move beyond probability theory into reality customized on an individual basis.

The EASE process has not only given me a roadmap for the individuals I work with to better understand how I can help them, but also demonstrates my objectivity and commitment to a process that provides customized results.

Ultimately, the success of any plan is a result of regular reviews and reinforcement of each step in the process. I believe that by establishing and understanding client’s priorities and communicating through the use of interactive technology, I can help them create confidence, maintain dignity and experience economic freedom in their retirement.

Matsko is a registered representative of Lincoln Financial Advisors. Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment adviser. Insurance offered through Lincoln Marketing and Insurance Agency, LLC and Lincoln Associates Insurance Agency, Inc. Retirement Security Centers is not an affiliate of Lincoln Financial Advisors. CRN1806715-052517

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