Clients depend on you to help them ensure they will meet their financial needs throughout retirement years. It is important to ensure that they don’t make common mistakes that could derail their best laid retirement plans.

“Because of higher life expectancy, people are living in retirement for as long as they save for retirement,” says George Hartman, CEO of Toronto-based Market Logics Inc. “Very few go from full-time work to full-time retirement.”

But once they are no longer working, Hartman adds, clients should not have things like debt servicing, illness or disability to cause them to run out of money.

These problems can be prevented by avoiding the following common mistakes:

> Retiring with too much debt
According to an April 2010 study by Royal Bank of Canada, four in 10 Canadians over the age of 50 who have assets of at least $100,000 retired with some form of debt; one-quarter entered retirement with a mortgage on their principal residence.

“Some debt is not a horrible thing — it provides flexibility,” says Stephen Reichenfeld, vice president and wealth counselor with Fiduciary Trust Co. of Canada in Toronto. “But too much debt is not good.”

The cost of debt servicing can erode your clients’ retirement incomes. That is why it is necessary to take a serious look at income and expenses prior to retirement, Reichenfeld suggests. “[Debt] is not something that can be fixed overnight,” he says. “That is where a good financial plan comes in.”

It is best to enter retirement with no debt. If some debt is unavoidable, you should ensure that your clients have sufficient income to meet their debt payments as well as their retirement needs.

> Not having sufficient insurance
“The older we get, the higher the probability of disability, critical illness and the need for long-term care,” Hartman says.

Disability, critical illness and long-term care insurance can help offset the cost of these potential life events and prevent clients from having to dip into their retirement savings.

It’s best to advise client to acquire the relevant insurance prior to retirement. It is cheaper at an early age, and your clients might not qualify for coverage if they fail to meet underwriting requirements at a later stage in their lives.

> Ignoring inflation
Inflation can erode your clients’ savings.

“You need assets with potential to grow,” Reichenfeld says. Your clients should invest in assets that provide a rate of return that exceeds the inflation rate or are indexed to inflation.

> Investing too conservatively
“Clients should have a balanced approach to risk,” says Reichenfeld.

Typically, clients move closer to retirement they should put measures in place that protect their wealth. However, while they may shift to a more conservative asset mix, they should bear in mind that retirement can last for 25 or 30 years and should not dramatically alter their portfolios, says Hartman.

“In reality, people’s personal tolerance for risk doesn’t necessarily change during retirement,” Hartman says. Their individual circumstances should “automatically dictate their asset mix,” he adds.

Reichenfeld suggests investing in tax-efficient assets that offer flexibility and access to cash and would give them the ability to adapt to changing circumstances.

IE