Welcome to Financial Advisor IQ

Tell Clients to Take Retirement for a Test Drive

By Emily Brower Auchard July 29, 2016

This time we hear from Holly Kylén, a financial advisor with Voya Financial Advisors in Lititz, Penn. Kylén relates when she realized she could help ease clients’ fears about retirement by having them “play retirement” — practicing living life on their projected income before they commit to retiring.

For many years I’ve received referrals from a therapist who works with couples who are under some kind of financial stress. At one point he referred a couple dealing with a tremendous amount of anxiety about transitioning to retirement. It was the first time I’d had a referral with this specific request --namely, that I tell a couple whether it was okay or not for them to retire.

As it turned out, working with this couple was a pivotal moment in my practice. It changed the way I do retirement planning. When the couple came in, the wife sat at my table with a box of tissues and bawled. She said she couldn’t imagine being able to live if her husband, who was the primary breadwinner, wasn’t earning an income anymore. The husband, on the other hand, wanted to stop work and was angry with his wife.

As I had done in the past with other clients, my first step involved asking them to collect a detailed picture of their spending over 30 days to get a handle on both base expenses as well as the cost of their lifestyle. I put that all on paper for them and then said, let’s pretend that you’ve retired and here’s your income and expenses. The wife looked at it and said it looked good on paper, but she didn’t feel confident about the numbers or the results.

We went round and round, crunching the numbers over and over again. Finally I stopped and thought to myself, “Stop the madness.” I stood up and looked at the wife and said, “You know what we’re going to do? We’re going to play retirement. You’re not going to actually retire, we’re just going to pretend you’re retired. Ok?”

Holly Kylen

The retirement budget had them planning to live off about 80% of their current income, so I told them we would take 20% of their monthly earnings and place it in a savings account. Then for 90 days, their assignment was to live off the remaining 80%. The wife calmed down and agreed to give it a try.

Ninety days later, they came in and all the tension between them had disappeared. Not only were they able to live quite comfortably on their retirement budget, they ended up only needing 70% of their income, meaning they were redirecting another 10% towards their savings. As a result of the trial run, they were both confident enough to set the husband’s retirement date and to continue the exercise for another three months. When we checked in two months later, the couple had already booked their first retirement vacation.

Their therapist called me to say he was amazed at the transition in the couple’s relationship and recommended that I take this same approach with every client nervous about retirement. As I’ve continued working with other clients to "play retirement," about 80% of the time they’re perfectly happy living off their projected incomes. The other 20% of the time, they decide it would be better to work a little longer or keep a part-time job to supplement their retirement income stream.

This is probably the simplest but the most powerful solution I ever had. It provides clients a way to make decisions about retirement based on concrete reality instead of guessing whether or not they are ready. It gets planning out of the textbook and into real life. Today, I have new clients come in asking to be set up to "play retirement."