Your client comes to you in a panic: he’s just had his 50th birthday and, suddenly, all he can think about is whether he will have enough when he retires. Sound familiar?
That scenario is familiar to Bev Moir, a senior wealth advisor with ScotiaMcLeod Inc. in Toronto.
“I have people coming in who are 40 and have nothing saved,” Moir says. “And then I have clients who are 50 who realize they only have a bit [of savings] but not enough. It’s kind of scary.”
While your clients may be counting on government programs, such as the Canada Pension Plan and old-age security, these programs will likely not be enough to fund your clients’ desired retirement lifestyle.
Many of these clients are members of the sandwich generation — caught between the pressures of helping university-age children and caring for aging parents. So, saving may have been difficult.
Moir offers a few tips on how you can help clients who are getting a late start in retirement saving:
> Examine cash flow
The first step in helping late savers, Moir says, is to take a close look at their spending habits.
One method is to get your clients to record all their income and expenses for the month. This can be done by compiling pay stubs and receipts or keeping a log of income and expenses in an Excel document. At the end of the month, compare total expenses with total income.
This strategy will help your clients see where they can rein in discretionary spending, Moir says. It’s also more persuasive than simply telling your clients to “live on a budget.”
> Use basic saving strategies
Take a “back-to-basics” approach to helping these clients save for their retirement, Moir says.
Make sure your clients maximize their RRSP contributions and reinvest the resulting tax refunds in the RRSP or a tax-free savings account. If debt is a problem, use the tax refund to pay off debt.
> Temper expectations
“Clients need to take responsibility for their lifestyle,” Moir says. “They have to learn to live within their means.”
So, those clients who have visions of yachting in the Mediterranean or golfing in California may have to revise their retirement expectations. But they can still have a comfortable retirement.
> Foster a positive attitude
Although your older clients might be behind in their savings, Moir says, remind them that there is still hope for a comfortable retirement.
Keep these clients focused on the future instead of the past. For example, have your clients visualize three or five years down the road, when their children will have finished school and they will then be able to catch up on their savings.
“It’s true, wealth doesn’t happen overnight,” Moir says. “It’s like the tortoise and the hare; it takes time to build it up. But it’s never too late to start.”