How to manage clients’ high expectations for retirement

Mrs. and Mr. Penny are sitting in their CPA financial planner’s office. Mrs. Penny, a 66-year-old community college professor, retires at the end of the school year with a modest pension. Mr. Penny, a 67-year-old construction foreman, plans to retire next year.

Neither paid much attention to their retirement savings until about five years ago, when they first engaged their CPA financial planner for tax advice.

“I hear Bora Bora is beautiful in the summers,” Mrs. Penny says to her husband, who nods and mentions taking off for the mountains in Austria after their beach trip.

Their CPA financial planner, Dana, looks at their assets and their expenses and considers their longevity. She gives some thought to their Social Security income, potential medical expenses down the road, income taxes and insurance. While the Pennys dream out loud about soft sand beaches and majestic, snow-covered mountain peaks, she runs some simulations and furrows her brow.

The Pennys aren’t going anywhere.

Mrs. and Mr. Penny are lucky. Thanks to Dana’s advice, they did set up retirement accounts several years ago and made somewhat regular contributions. And while retirement is realistic for them, globetrotting is not. Their CPA financial planner knows it is her obligation to explain this.

But no one mentioned Bora Bora.

As a CPA, you often have to hand out unpleasant news about people’s finances. Client reactions range from the defiantly incredulous to shrugging it off—but you never know what you’re going to get. And having to deliver difficult news… well, it stinks. But there are ways to mitigate the impact of these conversations and, in many cases, avoid them altogether.

If they’ve planned ahead by coming to you, prepare them for multiple outcomes.

Every retirement plan is different when done correctly: tailored to income, savings, client lifestyles, etc. The Pennys gave their CPA financial planner a heads up five years ago about retirement. That’s not much time, but a crucial question she should have asked (and had them record in a questionnaire) is what kind of lifestyle they hoped to have in retirement. It’s not likely she could have done much to generate the income needed for international jet-setting on a regular basis. However, she could have better prepared them for the reality that excessive travel would probably not be possible.

Additionally, she should have asked to be updated on their expectations in regular touch-base meetings. Not only do expectations change over time, but the performance of the clients’ portfolio regularly forces course corrections that can mean the difference between living the good life and just getting by.

The Pennys needed to know from the start: there are no guarantees. Simply having an account and putting money in it doesn’t ensure retirement success; it’s just the beginning. By seeing different potential scenarios and having regular check-ins with their CPA financial planner, they’d have had a better idea of what they could do in retirement. Preparing clients in this way makes the transition to retirement far smoother.

Ask clients if they’ve thought about “plan B.”

Visualization is a powerful tool in acclimatizing people to less-than-ideal circumstances. Some questions you can ask in initial meetings:

Suppose you can’t travel/buy X/put the grandkids through college. What would your retirement look like? Can you think of some alternatives that would make you happy?

Can you compromise? If we adjust your budget, perhaps we could work in (one trip per year/one new car/paying for the grandkids’ room and board but not tuition, etc.).

You have the money to do some of what you want, but it could leave you short for medical expenses later. Have you considered whether you’re likely to need regular medication or long-term care?

Do you want to have something left for your family when you’re gone?

Don’t be afraid to be honest.

It can be uncomfortable to deliver the truth. But allowing clients to think their retirement will be a rainbow-festooned joyride of pleasure and unlimited spending when it clearly can’t be is crueler still. Managing expectations means being frank about the reality of your clients’ situation. When the Pennys first went to Dana five years ago, she was able to guide them to a result that would help them maintain their current lifestyle and meet their expenses in retirement. But they wanted more, and if she’d known that, she could have prepared them from the beginning.

Communication is key. Maybe face-to-face meetings are less common than they once were, but that shouldn’t stop you. Pick up the phone, send an email or have a Skype session. Engage your clients and make them an active part of their retirement plan. You undoubtedly want to help them meet their dreams. But preparing them for reality is just as important.

If you’re looking to learn more about providing retirement services, you should consider the AICPA Retirement Planning Certificate to hone your skills and demonstrate your mastery. Plus, this gets you one step closer to the PFS credential. To learn more about formalizing financial planning services in your tax practice and to find helpful resources that support you in your role as a CPA financial planner, visit our planning and tax advisory services hub.

Adam Junkroski, Lead Manager – Communications, Tax & PFP, Association of International Certified Professional Accountants

How to manage clients’ high expectations for retirement

Related Stories