RETIREMENT
“ I think when we brought this concept to life , we were a little bit ahead of our time . I feel that the environment is more open to this type of dialogue now ,” Daniel says . “ The major math that Chris came up with is the opposite message of telling a 20-year-old they have time on their side because of compounding . What she would say is a dollar in is a dollar out in your 60s , because you don ’ t have much time .”
Instead , that money could be better used showing soon-to-be-retired clients how they spend within their budget while indulging in meaningful moments . Jamie Hopkins , a managing partner of wealth solutions at Omaha , Neb . -based Carson Group , has evolved his own set
of recommendations for clients , which includes putting a stop to saving except for what ’ s matched by an employer .
And catch-up contributions ? Those can be a sucker ’ s bet for clients this close to retirement , Hopkins says , noting that a lot of people already have enough qualified plan savings , and the money spent on catch-up doesn ’ t meaningfully impact retirement . “ But it could be meaningfully impacting the now ,” he says .
Putting the brakes on saving for retirement and spending that money instead on quality of life is a strategy best deployed with clients about three years before their planned retirement age , these advisors say .
One of his clients , for example , was almost ready to retire and had been doing the opposite of what Hopkins recommends . “ He hadn ’ t gone on vacation for three or four years . He just buckled down because he was getting ready for retirement . And he was right on that line of not knowing if he saved enough or needed to do more ,” he says .
Hopkins says he encouraged the client to spend $ 15,000 on a two-week vacation with his wife and it was so successful in reinvigorating the client that he worked another six months and did it again . And again .
“ He bought a car , and worked for six more months . Then he went to Ireland , and could work another six months because he ’ d had this great experience ,” Hopkins says , adding that the work-reward cycle was easy for the client to get used to . “ He ended up working for five more years where he was making six figures . And that has totally transformed his portfolio .”
Hopkins illustrates how the sixmonth cycle works with a hypothetical client who makes $ 100,000 a year . Every six months , that would be $ 50,000 the client doesn ’ t pull out of their retirement portfolio .
“ If you were saving 20 % of your income , it would take you 3.5 years to save that . So not only do you not spend it , but it ’ s invested and you delay the date of withdrawal ,” he says . “ You take all these benefits together , and the idea of spending more to stay in the workforce makes a lot of sense .”
Average Clients Benefit The Most Putting the brakes on saving for retirement and spending that money instead on quality of life is a strategy best deployed with clients about three years before their planned retirement age , these advisors say . And typically , these clients have pretty solidly funded their retirement , with maybe $ 1.2 million to $ 2 million in assets .
Hopkins , previously an associate professor of taxation at the American College of Financial Services , says that during his teaching years he developed a test to see what worked and what didn ’ t for retirees , and discovered that people who were financially literate at 50 or 55 were not retirement-income literate at 65 .
“ They didn ’ t really understand distributions , taxes or how to spend their savings ,” he says . “ All the systems and processes that build up to retirement are about savings . Every system flows on the savings side . There ’ s nothing on the spending side .”
The strategy is also great for clients who are feeling burned out and desperate to retire , but have financial reasons for wanting to hang on a few more years , as per Hopkins ’ s earlier example .
It ’ s not for people who have low assets , or very high-net-worth clients who have full autonomy in life , he says . People who are just planning on Social Security payments already know how to adapt to lower income .
“ We don ’ t have to teach [ people taking Social Security only ] how to spend ,” Hopkins says . If you ’ re on the top 15 % of American wealth , on the other hand , “ that group really does have wealth they could spend but doesn ’ t know how to .”
52 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2023 WWW . FA-MAG . COM