Why clients need a formal, written retirement plan

May 15, 2024

Couple sitting on a couch discussing retirement with a financial professional

"What gets written gets done."  You’ve likely heard this popular phrase. Perhaps you’ve even taken it to heart and written down your own health and fitness goals or career objectives.

But what about retirement goals? As a financial professional, you certainly see the value in putting a formal, written retirement plan in place. So, why is it that only one in five retirees and non-retired workers has done so?1 

If the old adage holds true, encouraging clients to write down their retirement plan may help them reach those goals. It may also provide accountability and conversational talking points when you meet with them. Helping clients create formal plans could also elevate their perception of you — from being an order-taker to a strategic and consultative partner. 

In the end, written retirement plans not only can help clients succeed, but may be vital to your own success as well. 

Informal vs. formal retirement planning

What does an informal retirement plan look like? It might include a target date for retirement or claiming Social Security benefits, or conversations about rolling over an employer-sponsored retirement plan. Perhaps a client has an approximate monthly income they think they’ll need to live on once they retire.

A formal, written retirement plan, on the other hand, includes those things and more. A formal plan outlines each potential income source, projected expenses, asset allocations and specific details in writing, including the necessary steps that need to be taken along the way. Detailing each element in writing can help minimize guesswork and help them feel more confident.

Working with a client to develop a written plan may also expose potential risks that need to be addressed and provide an opportunity to clarify the potential benefits of supplemental financial products or contributing a greater portion of each paycheck to their employer-sponsored plan.

Potential benefits for clients

In addition to providing professional guidance, an objective of working with clients is helping to reduce anxiety and fear over potential retirement worries. Fortunately, those with written plans are 87% more likely to say they feel confident in their ability to live the lifestyle they want than those without a plan. Individuals with an informal plan are 70% more likely to feel confident.1 

Having a formal plan was also an indicator of how likely someone was to complete important retirement planning activities that could help them live more confidently and comfortably in retirement than those with an informal plan or no plan at all. Examples include:1

  • Determining what their income will be in retirement
  • Calculating their available assets and investments
  • Determining Social Security benefits at various ages
  • Estimating their retirement expenses
  • Determining how long their assets will last
  • Evaluating healthcare coverage options
  • Developing retirement income strategies from their savings

Helping your clients assess each of these areas and documenting their goals can help paint a clearer picture of where they stand today and where they need to focus their efforts in the coming years.

Benefits for financial professionals

You’ve no doubt worked with clients to identify retirement horizons and may have even worked with specialized software to develop projections and potential scenarios. Implementing a formal retirement plan will leverage these and other tools to create an overall written plan that your client can focus their sights on. 

It may be helpful to develop a checklist or spreadsheet to synopsize each area of their retirement plan. Doing so may feel less overwhelming and make it easier to digest. Plus, your client can more easily see what’s going well and which areas still need work.

Not only can clients benefit from such a holistic approach, but financial professionals may also benefit through stronger client relationships and a personalized service model that could distinguish you from robo-advisors or other practices. 

Developing a formal plan can also help you gain deeper insights into your client’s needs and wants, and create opportunities to expand conversations about tax strategies, estate planning and engaging the next generation of investors.

Many investors claim to have a retirement plan, but when asked to show it on paper, they’re hard pressed to pinpoint what that plan is. You can help change that by working with clients to develop a formal, written retirement plan.

1LIMRA. Just 1 in 5 Retirees Have a Formal Written Retirement Plan. 2023, 11 October.