Are Planners Pushing Too Hard For Savings? Most say that’s laughable.
Almost any financial planner will tell you that while some clients may be saving enough for retirement, too many aren’t at all ready for their golden years.
But a recent story in The New York Times suggests just the opposite. The story quotes academics who believe that investors may be saving too much for retirement – especially consumers who use online calculators.
This take on things may have sent a wave of relief through many consumers, especially those who have neglected their 401K. But planners had another response. “I think it’s irresponsible as heck to put something out there like that,” says Eric Brotman, CFP. The Timonium, Maryland-based adviser had been emailed the story from a confused client who sent with it an article that claimed investors weren’t saving enough. Brotman’s sentiments are with the latter. He believes that consumers need to sock away 15 percent of gross income as a base line goal, and that most people are saving nearly that much.
Michael Peterson, a Chambersburg, Pennsylvania-based financial planner agrees and considers the notion that most investors are saving enough for retirement laughable. He also worries that too many people are still depending on Social Security to meet their needs. “That was never meant to be the only source of retirement income,” he says.
The goal of retirement planning, of course, is to ensure that investors have enough savings to last through their life. Often, planners err on the side of caution, making sure clients don’t reach age 95 and end up on the street. And Peterson does acknowledge that that in some cases, advisers may be pushing their clients a little too hard and might advise consumers who have planned diligently to slow down a bit. “At some point in our life, spending does slow down,” he says. “You don’t need the same amount at 66 that you do at 90.”
Brotman acknowledges that retired clients can get by on much less income than they needed during their working years. “But I don’t know many people who just want to get by,” he says. “And wouldn’t it be better if you didn’t have to?” He admits that some of his clients are probably saving more than they’ll actually need to spend during their lifetime. “But most of my clients want to transfer wealth,” he says. “They don’t want to create trust babies, but they do want to do charitable work.”
The sentiments of both Peterson and Brotman are echoed by Manasquan, New Jersey-based planner Jorie B. Johnson who observes that although some clients have watertight retirement plans, others are completely under water because of the amount of debt they’ve accumulated. “Some are saving adequately, but are living beyond their means,” she says. And she points to the main reason to get the spending/savings balance right. “I try to show some of my clients that they could be spending more money today and enjoying life, not saving every penny,” she says.