MIAMI -- Having a clear and sustainable withdrawal policy in place plays a critical role in helping to keep retired clients from outliving their assets. But getting them to stick to the plan might be even more important.
That was the consensus of panelists and many audience members at a session on retirement strategies here at the FPA Retreat this weekend.
"We come back to these policies over and over with our clients," said panelist Elissa Buie, president and CEO of Yeske Buie, a firm with offices in San Francisco and Vienna, Va. Her firm uses a safe withdrawal formula devised by researchers William Klinger and fellow panelist Jonathan Guyton, principal of Cornerstone Wealth Advisors in Minneapolis.
STAYING ON TRACK
But whatever formula advisors use with clients, Buie stressed the importance of helping clients stick to the policy. Keeping clients on track is so crucial, she said, that Yeske Buie uses a visual report card for client meetings, with a green thumbs up or big red circle with an "x" to show whether the clients have spent within their budget for the year.
Not only does a clear withdrawal plan help clients spend within their means, but it also draws a more concrete link between spending priorities and any needed tradeoffs, panelists and planners said. An advisor might remind clients, for instance, that they had chosen to spend less on leisure in order to help pay for a grandchild's education.
"These policies are a bridge to our values," Buie said. "When you can translate someone's goals into policies, it's easier to stick with it because it is based on the values that matter to them."
DISCRETIONARY ACCOUNT
Guyton offered another way planners can help clients stick to goals: a separate carve-out for discretionary spending on entertainment, travel and unexpected expenses.
In setting aside an amount for discretionary spending, Guyton said, he helps clients avoid "fudging" their withdrawal policy to meet an unexpected cost, Guyton said.
He likes to tell clients that a sustainable safe withdrawal policy amounts to "bulletproof" armor. So when clients deviate from the plan -- even when they say, "it's a just a little this one time" -- it's like a chink in that armor, which can damage the portfolio and threatening the client's retirement.
"We don't know if something may hit right at that chink," he said.
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