Most Americans identify retirement as a high-priority goal. With few exceptions, they look forward to the day when they can put aside the demands of the workplace and pursue the leisure, travel, and personal interests they now cram into weekends and short vacations. As they grow older, most speak clearly of their wish to maintain financial independence and of their desire to avoid becoming a burden to relatives or to society.

Interest in retirement issues is high, but two demographic trends make the need for skillful retirement planning imperative. The first is the fact that the typical U.S. retirement age is approximately age 64 for men and age 62 for women (Center for Retirement Research at Boston College, 2015). The second is that the life span of the average American adult has steadily increased over time. During the 1930s, when the foundations of the U.S. Social Security system were being laid, men represented the vast majority of the working population, and few men were statistically forecasted to live beyond age 65. Today, expected life spans for U.S. males have increased substantially, and a much greater percentage of women, who enjoy still longer life spans on average, are now in the workforce. Together, these two trends have expanded the period over which retirement income must be maintained, making retirement planning more critical. This planning, as detailed herein, is further complicated by the fact that it depends on a number of assumptions that must be made-about retirement age, life span, income requirements, and investment returns-some of which may not hold up over time.

This module covers the areas in which you must be knowledgeable to assess the investment considerations that are part of retirement planning for your clients. In this module, you focus on issues that are under the client’s direct control-other modules detail matters under the employer’s control (such as the design of a qualified pension plan) or that are sophisticated compensation planning techniques for highly paid clients. The module covers factors to consider when estimating the financial void that must be filled once regular employment income ceases. It then considers the various means of filling that void with income over an extended period; these means include personal and employer-sponsored retirement plans, personal savings, and Social Security benefits. It describes alternative methods of accumulating retirement income and taking distributions, some of which are within the client’s control. It closes with general investment considerations for retirees plus creative sources to increase cash flow.

Author: Jennifer Coombs

Jennifer Coombs is an associate professor at the College for Financial Planning. Prior to joining the College, Jennifer spent a decade working in the financial services industry in New York City, with a special focus on equity research and analysis. She holds a Bachelor of Science degree in Finance and Political Science from Clarkson University. You can contact Jennifer at jennifer.coombs@cffp.edu.

Complexity Level: Intermediate