NAFCU Services Blog

Apr 12, 2011
Categories: Growth & Retention

7 strategies to help members that are five years from retirement (or so they thought…)

Let me start this post by saying that although I am way way too many years away from my own retirement, I still feel very much connected to those who are soon to be retirees. I too dream of my retirement – of those carefree days of leisurely lunches with the ladies, spontaneous travel and actually participating in the painting hobby I claim to have (but, then I remember I’m about 40 years away from that – or more! – and snap back into reality). But I do wonder what it would  feel like to be just 5 years from retirement bliss and then suddenly have to doubt that I can afford it? I can definitely feel for those worried pre-retirees and you should too, because they are members at your credit union.

Did you know nearly 2 in 3 (64%) of Americans believe that realistically they won't ever be able to stop working and retire? (As reported in a StrategyOne Survey). That’s depressing. :-( And 10,000 baby boomers in the U.S. are turning 60 each day, on average! Wow – if that’s not an obvious sign that your credit union help is needed, I don’t know what is.

The market downturn has indeed affected us all. And when you’re five years from retirement and your stocks plummet, your 401(k) takes the biggest dip you’ve ever seen and you have lost the excitement you used to get when crossing off those days from your retirement countdown calendar—where do you turn to keep your retirement dreams alive? Is there a way to hang on to your plan of lounging on every beach around the world before you kick the bucket?

Tell your pre-retiree members that the answer is YES! (Well, maybe not every beach.) And take some advice from Barry Dayley, EVP of Money Concepts as we take a look at his 7 essential strategies to help your pre-retiree members deal with their current financial situation as well as realistically reevaluate their financial plans for the future.

1.) Realistically valuing members’ nest eggs

Let’s be honest – we round up, not down. It makes us feel better and it makes us look better too. But rounding up to the next 10 or 100 thousand dollars? Well the power of positive thinking isn’t always that powerful. You must help your members realistically take a look at exactly where they are, exactly how much they will need for retirement and how close they are to that goal. Help your members see all of their options and make those hard choices – even if they don’t exactly fit into their retirement dreams. Is part-time work an option or delayed retirement? (Maybe my whole ‘beaches around the world’ thing isn’t the best plan…).

2.) Reduce members’ debt

Obviously, this is a goal of many people of all ages, but it is even more critical for pre-retirees. Many Baby Boomers still have mortgages on their homes and may retire with them – help these members come up with a plan to reduce (or ideally eliminate!) debt before retirement and make sure they have the right mortgage or loans for them to manage if they do need to do so during their non-working years.

3.) Stress inflation in retirement

Inflation is no doubt an important factor in determining future expenses during retirement. It’s much less noticeable when your wages change and keep up with inflation, but inflation can be painfully evident when your income is suddenly fixed. Do your members know that? Do they know inflation is even higher for elderly people? It’s your job to tell them and help them plan for it.

"Inflation is when you pay fifteen dollars for a ten-dollar haircut you used to get for five dollars when you had hair." - Sam Ewing (I love that quote!)

4.) Be ready for rapidly escalating health care costs

This is one segment of inflation that’s tracking much higher than any other. Apparently, people don’t account for this, or maybe frequent trips to the doctor aren’t exactly part of the rose colored retirement dream. Nonetheless, 42% of retirees spend more on healthcare than they originally expected to. And I’ll throw another number out there for you – $80,000 – that’s the estimated cost of long term care per year for retirees in today’s dollar value. Yikes, that certainly shocked me!

5.) Prepare for affluent members’ rising taxes

The current economy may result in higher taxes for everyone and may increase even faster for the wealthy. Help your affluent pre-retirees structure their retirement account withdrawals to minimize taxes. And be PROACTIVE in helping these members now with tax minimization strategies. How often do your members call you up and ask how to best prepare for retirement? I’m guessing it’s not that much. You have to tell your members what their options are and offer your financial guidance in this important and unfortunately scary time. Talk about enhancing member relationships – if you helped me save thousands of dollars (or really any amount of money), you’re definitely going on my Christmas card list.

6.) Help members put risk in perspective

If there’s one thing pre-retirees are worried about it’s whether or not their money will last as long as their lives. This fear inhibits action, even if it’s for their best interest. Help your members put it all into perspective and avoid risky and loosing strategies. Some options that your pre-retiree members consider the safest are not always the case. Barry gives a great example about “safely” putting money into a money market account with 2% interest…but maybe inflation is 4%. Your pre-retiree member would be loosing money while thinking what we all think – money markets are a low-risk, safe investment. Please, enlighten them on what is indeed a risky option and what are some much better options for them at this point in their lives.

7.) Determine a member’s sustainable and realistic withdrawal rate

It’s relatively easy to decide how much you’re putting into a retirement account and what kind of retirement account or accounts you’ll use and then kind of sit back and save. But once you need to begin withdrawing from those accounts for your retirement, it now becomes very complicated for your members. There are rules to be followed and high-impact decisions to make. You must counsel your members through this complex phase on what is a realistic withdrawal rate, from which accounts and how exactly to do it. When you’re dreaming about retirement, I don’t think IRA tax distribution laws are the first thing that comes to mind…but maybe they should be. (Enter credit union!)

Take Action!

This pre-retiree group needs a trusted financial advisor and you, their credit union, should be it. Make sure you have services, workshops, planning sessions available for your members so they don’t have to get it from somewhere else or scarier yet, not at all. Be proactive! Retirement isn’t all world travel and lunch dates (despite my dreams, sigh), and your pre-retiree members must be educated on the important planning and decision making they need to take part in for a worry-free, financially fit retirement. Help them now and they will certainly thank you later…I see grandchildren’s first savings accounts in your future.

Want to hear it straight from the expert’s mouth? Watch Barry’s full webcast or talk to Money Concepts – they live and breathe this stuff – if you have questions, they’ll certainly have great answers. :-)

And one shameless plug – our credit union locator site,, has a bunch of retirement calculators to help your members plan. You can even embed them on your website! What can I say, once a marketer, always a marketer. :-)