IFA: Working with Retirees part 1 of many

Most IFA that I have met work with people in the accumulation stage, or people who have a huge surplus. So in many cases, the mistakes of the IFA or the client will not matter – the corpus is so huge, that lifestyles do not change. However, going forward we will work with people who have barely enough to last them during their lifetimes.

The challenge is simply that effectively managing a retirement portfolio (means no earned income, only investment income like dividends and capital gains), and the distributions that have to happen from the corpus, is about more than just managing the investments themselves. Retirement portfolios have to face sequence of return risk (not sure other than me and Pattu who else has spoken about this) – the possibility that even if the portfolio generates the desired long-term return, if it achieves that return with half a decade of poor string of returns, ongoing distributions could deplete the portfolio before the good returns start! So when the best returns come, you have very little capital available to benefit from the nice big returns.

Retirement income issues is just a small part of what it means to specialize in retirement and retirees. There are issues such as planning for investing in Senior Citizens savings scheme, renewing the PPF, retiree-specific tax planning, making sure that the cash less medical insurance works EXACTLY when the retiree needs it, and other health insurance decisions. Housing wealth, reverse mortgages, housing lifestyle choices, location choices, etc. also need to be handled. A person may live in a Senior Citizens community living place from age 65 to age 75, and then shift to a Senior Citizens home with assisted living till age 82 and then move into a geriatric care center and spend the rest of his/ her life there. You will have to handle cognitive decline and the issues that come with it. Then there can be the issues associated with death, grieving, divorce, and losing loved ones. Relocation to a different place when hey can instead of when they MUST is a very important part of the Senior Citizen needs. These are the issues that retirees face, and need help with – and how many of us are ready to handle this? Or are we even prepared to collaborate with a say a nursing school to learn some of these skills needed to deal with senior citizens? Remember these needs are not yet well articulated and you cannot find an article about this in the Mass media. Wait, now it will happen, with this article acting as a cue.

If we need to do all this, we at least know that we do not know. Funny thing is I do not even know where I can go and learn this.

The message is very clear, if you want to specialize in dealing with people over the age of say 60 – i.e. what we call in India the ‘withdrawal’ stage of life, you need to do a lot more. First of all understanding that this age group has to be further classified into at least 3 age categories – 60 to 70, 7o to 80, and 80 and above. Clearly, the needs of a 60 year old is very different from that of a 87 year old dementia patient.

So lets go and figure out what we can learn, what we should learn and what are nice to know stuff.

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2 Responses to “IFA: Working with Retirees part 1 of many”

  1. Thought Provoking and scary at the same time from the view of a client, who has to face this situation specially when the IFA comes knocking and asking some questions.

  2. Nidige Kumar on May 18th, 2017 at 9:00 pm

    Retirement Life Management appears to be quite complex. Certainly it requires ‘n’ number of articles to describe. One of my friends was suggesting that an alternative to assisted living could be to pay one time upfront investment and own a decent double-room in any branded hotel at a good location, for spending the residual life years with assured services provided by default on pay-as-you-go basis (food, cleaning the rooms, doctor on call, tour packages etc.,). This may require huge corpus to start with. How do you view this kind of approach?

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