A recent Hartford Funds survey showed that most people working with a financial advisor chose to do so to begin planning for their retirement. The retirement topic is relevant to each and every one of us, and I have a simple—but surprisingly informative—exercise that financial advisors can do with their clients that will incite a meaningful retirement conversation.
Ask your clients to make a list in response to this one question: “If you were to leave your company tomorrow, either to retire or to accept an opportunity elsewhere, what are the three things you would take with you?”
Their answers might surprise you. As I travel the country, I ask this question a lot. It is funny to watch the reaction on people’s faces when I ask the question—I can see them pause and consider. Perhaps they have dreamed about that day, but chances are, they haven’t thought about what they would take and what they would leave when the day finally comes.
I generally hear a few common responses, such as a coffee cup, the items on their desks, their favorite pen. Once someone told me they would take memories.
One thing that is never mentioned is the thing that is most important to their life and future: their retirement plan. In doing this exercise, people essentially are saying that when they leave their current company, never to return, they will take coffee cups, office supplies and memories, but leave behind their largest retirement nest egg. Why? I would guess that if any of us forgot a coat or personal item, we would make a trip back to retrieve this item—so why are we not going back for our retirement plans?
I find that many clients leave money in their old plans because it is the easiest option. They don't have to do anything—no phone calls, no forms to fill out, no passwords to remember. A clean break. Or maybe they simply forget to do what it takes to retrieve their retirement money.
This could be one of the worst decisions your clients ever make. By leaving their savings in their old plans, they relinquish control over that money. They are limited to keep that money in the funds that their company dictates, so they lose the opportunity to take advantage of other investment options. They are also more likely to let it slip their minds when making future retirement decisions.
Don’t let your clients make this mistake. Doing this simple exercise not only breaks the ice with your clients, but it is also an easy way to give them some of the most important advice they will ever receive. Ask them this same question again later—a few months, a few years. I’m guessing that next time, they will not forget to add their retirement plan to the list, right alongside their mug and their memories.
All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable.
The preceding is not intended to be a recommendation or advice. This material is intended for general use by financial advisors.