Transitioning into Retirement - the cash flow question

** Transitioning into Retirement **

Attitudes to retirement are changing, as is the notion of retirement itself. Retirement might mean continuing to work in some capacity, or it might mean creating a new, as yet unfulfilled, aspect to your life.

Amyr Rocha-Lima makes the point that clients will contact a financial planner when there’s a particular trigger point for them to do so. This might be an event in their life, or a realisation that they don’t have a clear picture on whether or not they can retire.

But Amyr argues there was a further challenge. He said clients need to understand the financial plan, but also the cash flow modelling on which it has been built.

He says: “The problem is that sometimes a financial cash flow plan is delivered via sophisticated financial planning software, but without the context needed to help the client interpret the results."

“For example, some financial planners are now helping clients to understand their retirement plans by giving them a probability of success and a probability of failure. But let’s say that, given a client’s balance sheet and the withdrawals they want to take, the probability of the plan’s success comes out at 90 per cent. What does that mean?Well, you are essentially asking the client to think about how scared they are of a 10 per cent chance of failure.”

Amyr believes that is doing the client a disservice, and that planners need to go further in explaining what these probabilities mean.

He added: “In this example, 10 per cent failure doesn’t actually mean clients will run out of money and end up living on the streets. It means there’s a 10 per cent chance that, within their retirement journey, they will have to make some adjustments to the financial plan.

“I think that’s when we give clients confidence to be able to make an informed decision about the lifestyle in retirement they want to achieve and maintain for themselves and their loved ones.”

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Amyr Rocha-Lima, MSc FPFS CFP®

Amyr is a financial planner who specialises in helping successful business owners and senior professionals feel educated, relaxed and optimistic about their retirement plans.

He is a partner at Holland Hahn & Wills, a financial planning and wealth management firm based in Kingston upon Thames (United Kingdom).

Amyr is a Fellow of the Personal Finance Society and a frequent commentator on financial planning and wealth management matters for both national and specialist media.

Website: https://www.amyr.co.uk/about/
LinkedIn: https://www.linkedin.com/in/arochalima
Twitter: https://www.twitter.com/a_rochalima
Instagram: https://www.instagram.com/insidekingston/

Тэги:

#financial_planning #wealth_management #retirement_planning #investing

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