How to be a retirement lifeguard (and recruit others)

There are millions of older Americans swimming in the pool of retirement. The question is who’s looking after those retirees showing signs of distress or in danger of drowning financially? The best lifeguards are proactive looking for the slightest hint of any problem that could become a life-threatening situation. It takes a sharp-eyed financial advisor to catch a problem before it becomes a crisis, especially when you have hundreds of clients swimming. Some are in the deep end taking the biggest risks, some are in the shallows and prefer to play it safe, while others are quite comfortable regardless lounging along the sides.

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Let’s be honest. None of us have the wherewithal to protect every retiree in our city, much less those who live on our block. First, you don’t have the time, and second, you don’t have direct access to that pool of retirees because you’re not privy to their financial status. You’re a reverse mortgage professional; not a financial advisor or accountant.

What we’re talking about is not some new scheme that will somehow boost our personal or collective loan volume to new heights. We’re talking about becoming a relevant part of the retirement conversation and helping real people with real needs that may determine the quality of their life, health, and relationships.

One of those needs is being prompted by the big squeeze, otherwise known as inflation. A mere 10% increase in the cost of living can reduce a portfolio’s longevity for retirees drawing fixed-income investments or savings. That’s a 50% reduction or half as many years that their money will last. Any competent financial advisor knows this and will make excess withdrawals due to inflation a key part of their annual review with clients. 

As a financial lifeguard, it’s never fun to tell someone that they’re drowning but they just don’t know it. Yet that’s exactly what many advisors will face in that difficult conversation. Will they tell them they need to reduce their expenses or standard of living? Perhaps, but who really wants that? Will their advisor suggest that they increase their investment returns by taking more risks? Not likely if they have a conscience and any common sense. Will they tell them to go back to work part-time or find ways to generate more monthly income? Perhaps, when it makes sense and their client’s health allows for a return to work. 

The more likely strategy financial professional may suggest are to increase allocations of energy, materials, and financial stocks while reducing exposure to retail and consumer service sectors. But even if that works will that strategy generate enough earnings to offset inflation. Likely not. That generally leaves one choice, assets. The question is whether to sell an asset outright or slowly dissipate the accumulated equity. To suggest a retiree sell their home, downsize or rent and invest the proceeds is a bitter pill to swallow. After all, who wants to get rid of the home they worked so hard and diligently to pay down or pay off completely? The home where they feel safe and surrounded by memories. 

The more palatable solution advisors can present is an asset dissipation plan. One that avoids selling stocks when their share prices are down as a realized loss. A solution that takes some of the winnings off the table while finding more financial assets to extend or preserve sustainable withdrawals. A typical asset dissipation strategy, often called asset depletion, takes a fixed withdrawal from an account to boost income. But what happens when that asset’s value has been drained? It’s gone. However, a reverse mortgage provides the ability to tap into the value of an asset that typically appreciates and outperforms the market without relinquishing ownership or encumbering other assets as security. Now that’s one strategy that could substantially boost any financial professional’s skillset as a retirement lifeguard. Not only could they prevent their client from drowning, but they could actually give them the means to swim with confidence, or even relax along the sides knowing the lead weight of inflation won’t sink them after all.

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