Financial advisors can be instrumental in helping clients who are approaching retirement by taking a retirement lifestyle planning approach: find out what clients want to do when they retire, then help them work toward that goal within their financial resources. If the dream doesn’t fit the dollars, it may have to be tweaked — or reinvented.

Barry LaValley, a retirement educator who runs the Retirement Lifestyle Centre in Nanaimo, B.C., says advisors need to delve into what’s important to clients in key areas:

> Housing. Where a client lives in retirement will have a big impact on his or her finances. Contrary to assumptions that baby boomers would downsize as they approach retirement, many are buying bigger homes simply because they can afford them. With expenses easing as children complete their education, some boomers are able to purchase their dream homes or dream vacation properties.

But money tied up in real estate can curtail a client’s leisure activities or plans for travel, or limit the amount available to spend on long-term care insurance.

“Ask at what point your client intends to downsize housing,” LaValley says.

> Health. Health can change dramatically as people age, LaValley notes. “Currently, 40% of people over 65 have limited mobility because of chronic conditions,” he says. “So, it’s not going to be La La Land for the next 30 years. And the biggest killer in retirement is stress-related disease. Talk to your client about removing some of the stressors by getting proper insurance coverage.

“And, if your client needs to remain in the workforce longer for financial reasons, looking after his or her health should be an important part of the financial plan.”

> Family. Is your client a member of the “sandwich generation,” with dependent parents and children?

“Today’s 50-year-old may have a mother of 75 and a grandmother of 95,” LaValley says.

Does your client intend to educate the grandchildren? Has an adult child returned to live with your client? Does an adult child have a disability that means he or she will need lifelong financial support from your client?

Family obligations will affect your client’s retirement lifestyle. Such obligations can limit the amount put into investments, where the client lives, the amount of time spent on leisure pursuits or travel, and disposable income .

And how important is it to your client to pass on a financial legacy to children or charity? If this is a major concern, an estate plan should be in place and the client may have to adjust his or her retirement lifestyle to allow investments to grow for the next generation.

> Leisure Activities. Many people look forward to leaving the workforce to spend more time playing golf, sailing or working with a community theatre group. What will these activities cost? Golf club fees and time spent at the “19th hole” can ding a budget. But other activities, such as hiking or volunteer work, may cost little.

Does your client intend to travel, and how elaborate will trips be? A six-month world tour will eat up considerable assets; on the other hand, it may be a once-in-a-lifetime event to “celebrate” retiring.

> Caregiving. LaValley says most clients underestimate the cost of caregiving, for both themselves and their elderly relatives. People are living longer, but they may not be able to live independently in their later years. “The average Canadian needs long-term-care for eight years, which today will cost about $400,000 a person,” he says. “That would be double for a couple. And these costs could rise dramatically in 15, 20 or 30 years.”

If a client thinks care could be an issue, LaValley suggests looking at LTC insurance now because the chances of qualifying for it at an older age may be slim. RBC Insurance’s LTC insurance product, for instance, provides $200 a day of coverage for lifetime facility care or 730 days of home care. Premiums for a 45-year-old in good health will run about $200 a month; the same coverage purchased by a 55-year-old in good health could be another 50% more.

If you find your client’s expectations of retirement don’t fit his or her budget, talk to the client about lowering the former, says Wayne Taylor, president of the Canadian Association of Pre-Retirement Planners and president of Taylor Financial Group Ltd. in Edmonton.

@page_break@“Your client says she wants a yacht,” he says. “Has she ever owned a yacht, skippered a yacht or taken courses? Draw up a budget with a yacht in it. If she can’t afford it, talk about alternatives. Talk about renting a yacht for a few months or a few weeks a year. Talk about ‘deadheading’ — delivering yachts around the world.”

Cutting back on one retirement dream may be a way to realize another. The client may relinquish plans for the dream home in order to have a sailboat and belong to a sailing club.

“And the location of where you live is important to your financial plan,” Taylor adds. “If your client moves outside the city, the cost of housing may be significantly lower, yet she can still stay in contact with friends and health-care professionals. In many rural areas, there is a strong underground economy and people barter skills. Your client may be able to do some work in exchange for electrical, carpentry or plumbing work.

“Have your client think out of the box about what is really important in retirement,” he adds. “Then make sure all his or her assets are working efficiently. Encourage paying off debt so the need for income will not be so great in retirement. Have a client look at tax-saving strategies such as income-splitting if a spouse stayed home to raise children for many years and CPP/QPP pension-splitting.”

Lifestyle planning should also have room for future dreams. Taylor suggests setting up a “lifestyle savings account” — an invest-ment account to fund special projects in retirement. “Your client may not know what these projects are right now,” he says, “but down the road, she might want to buy a boat or a business. These accounts should be separate from RRSPs and emergency accounts, and they will need tax-friendly investments.”

LaValley cautions that there is of a huge gap between what people think they want in retirement and what they really want. Most think they want to travel, he says. Desjardins Securité Financier’s 2005 Survey on Retirement found that travel during retirement was the most popular dream for 48% of Canadian workers over age 40. But it also found that, upon retirement, travel takes a back seat, with only 24% of retired Canadians giving it top priority; greater importance is given to “being in good health.”

And the older a person gets, LaValley says, the more important being near family becomes. At the same time, travel becomes more difficult and travel health insurance gets more expensive.

Once the appropriate retirement lifestyle plan has been made, LaValley says, it should be reviewed with the client every six months. “Things can change dramatically,” he notes. “Remember the [2002] movie About Schmidt? A couple plan to travel North America in their mobile home, but a few weeks after the husband retires, his wife dies. Suddenly, everything in his life changes.

“So, too, your client’s health can change. And the kids may move back home with the grandkids.” IE