COLLEGE PLANNING | ESTATE PLANNING | INSURANCE | INVESTING | PORTFOLIO SPOTLIGHT | REAL ESTATE | RETIREMENT | TAX PLANNING

Getting a true picture of a retiree ’ s finances takes a bit of detective work , advisors say .

By Ben Mattlin

Experienced advisors have had to learn a few tricks to help clients budget better , and a few warning signs to detect a client ’ s failure to follow a budget before it leads to problems .

“ A retirement plan is a blueprint based on various assumptions ,” says William Bernarduci , a partner at Bolvin Wealth Management Group in Boston . But , he cautions , “ retirees tend to underestimate their expenses .”

He suggests starting with a baseline , using credit card statements and bank accounts to establish the cost of each client ’ s current lifestyle . “ Once you have the baseline plan in place ,” he says , “ you can include additional what-if scenarios for various retirement objectives ,” such as extra travel or a second home .

“ People forget to take into consideration the power of inflation , or they put in too high a rate-of-return estimate on their investments ,” says Brett Bernstein , CEO and co-founder of XML Financial Group in Bethesda , Md .

It ’ s also not uncommon for clients and advisors to underestimate taxes on Social Security benefits , pensions and required minimum distributions , he says . “ Some less experienced advisors don ’ t understand how pensions and Social Security benefits may change when one spouse dies , thus changing the income ,” he notes .

Perhaps the most frequent area of under-calculation is healthcare expenses , including insurance , says Spencer Betts , a principal at Bickling Financial Services in Lexington , Mass . “ Health insurance emerges as a significant transition point in retirement ,” he explains . “ While individuals have limited health insurance options during their working years , retirement offers a plethora of choices . This often proves to be where individuals miscalculate their budgetary needs .”

Medicare isn ’ t free , after all , nor does it cover 100 % of healthrelated costs , he says .

Different stages of retirement tend to require different types of expenses . In early years , people are more likely to travel . Later , they might relocate to be closer to children and grandchildren . As clients age , though , medical expenses typically become a greater drain on their income and savings . “ It ’ s imperative for advisors to understand how expenses evolve across these stages and adjust their budgeting strategies accordingly ,” says Betts . “ While we can plan for the future , we must also be prepared to navigate its uncertainties with agility and resilience .”

Many retirement budgets use lowballed home maintenance expenses , says David Zuckerman of Zuckerman Capital Man-

JUNE 2024 | FINANCIAL ADVISOR MAGAZINE | 49