Perhaps the largest financial change that comes with retirement is the transition from accumulating one’s monetary assets to using them. Once the earning phase has ended, the retiree becomes completely dependent upon guaranteed pensions like Social Security and the returns generated by their investments for survival. Many clients with limited assets are very concerned about outliving their income, while others fear the possibility of sustaining major losses in the markets or incurring health expenses that they will not be able to afford.

Financial Strategies

The first and most logical step that you can take as a financial advisor is to examine your client’s portfolio and assess the amount of risk that they are exposed to. And while at least a portion of their assets should probably still be in equities at this point, you should take a careful look at the drawdown risk that they are taking with their non-guaranteed holdings.

This risk is measured by the amount of time that it would take the client to recover from a major market loss, and is often calculated based on the last major drop in price of a given investment or index. Other types of risk such as inflation, interest rate and reinvestment risk should also be evaluated to ensure that they match the client’s objectives and risk tolerance. (For more, see: How Financial Advisors Can Help Gun-Shy Investors.)

Many advisors have chosen to divide the portfolios of their retired clientele into separate segments so that they can manage each portion more efficiently. The first segment of their assets is designated for current use and is invested in safe and liquid instruments, such as a money market fund, preferred stock or stable value fund. This portion should probably be large enough in most cases to cover the client’s basic living expenses for at least a year.

The next segment is much larger and may hold sufficient funds to cover the client for perhaps a decade of living expenses. This money is also invested conservatively but probably in a less liquid fashion. Corporate bonds, senior secured loan funds and other similar instruments may be appropriate here, as well as equity income offerings and hi-yield mutual funds or ETFs. Any remaining assets are then invested in the final segment, which is usually more focused on growth. This segment is designed to provide a hedge against inflation and will invest in common stocks and stock mutual funds and ETFs and other more aggressive holdings that contain market risk. This fund is used to replace the second segment after it runs out and will hopefully not be depleted at that point. (For more, see: Explaining Portfolio Rebalancing to Clients.)


Clients who have a good chance of living into their late eighties or beyond may also be good candidates for annuity contracts. These vehicles can provide lifetime guaranteed income if the contract is either annuitized or if the client purchases and activates a guaranteed income benefit rider. The latter option is often more popular nowadays because it still allows the client limited access to the principle in the contract in many cases. Longevity insurance is another alternative that can provide substantial guaranteed income to clients in their later years. Although this option can be expensive, it can also substantially reduce the number of years over which a client must stretch their retirement savings. (For more, see: How Advisors Can Help Address Longevity Risk.)

Those who are able to obtain long-term care coverage can also rest easier knowing that their potential health care expenses will probably be limited to the deductible limits in their policy. Many life insurance policies that are sold now also have accelerated benefit riders that will pay a benefit for critical illness, disability and long-term care. Clients who are still medically insurable may be wise to purchase one of these policies if their family histories indicate a pattern of need for coverage in one or more of these areas. (For more, see: 'Medicare 'Donut Hole' Essentials for the Financial Advisor.)

Emotional Support

Any experienced advisor knows that part of his or her job is to play psychiatrist for their clients on occasion. Those who are struggling with the emotional aspects of transition are often dealing with more than mere concern about whether they will be able to pay their bills. Because clients are now entering a phase where they are going to directly reap the fruit of their past efforts, they will often experience a period of reflection and evaluation of their ability to provide for themselves. Financial difficulties can lead to low self-esteem, feelings of inadequacy and disillusionment and other symptoms that may require counseling from a professional or spiritual advisor. (For more, see: Money Can't Buy Retirement Bliss.)

In some cases, clients may try to compensate for their financial shortcomings by taking too much or too little risk in their portfolios or making major purchases that they cannot afford in an effort to “prove” that they can do so. Those who are making clearly irrational decisions may need to be prodded into examining their thinking order to prevent them from disrupting their financial futures. (For more, see: Avoid These Common Investing Psychology Traps.)

The Bottom Line

Helping clients to transition into the final major phase of their lives requires can be one of the most challenging aspects of the financial planning profession. Of course, a properly constructed retirement portfolio and adequate insurance coverage are vitally necessary components of this process, but helping clients face their underlying fears and feelings can be a much harder task in some instances. For more resources on how you can help your clients deal with this change, visit the Financial Planning Association website at (For more, see: Closing in on Retirement? Read These Tips.)