Given the countless variables involved in assessing risks, needs, and strategies for retirement readiness, turning to averages provides a false sense of security and control. However, No One is Average, a report from J.P. Morgan, warns that “averages can be distorting because, in fact, no one is average.”
The solution lies in providing education backed with interactive visualizations of a personal retirement plan. Successful advisors actively engage clients and participants by understanding and addressing their specific circumstances. This approach prepares advisors to grow their business and prepares participants for retirement readiness.
As the study points out, the mean is often strikingly different from the median. For the 401(k) accounts used in the study, the mean balance was $76,000, while the median was just $18,000. Making plans based on the average for an individual with the median balance will result in an inadequate and unactionable retirement plan.
“Many people make improbable assumptions about their future portfolio returns,” states the study. “An effective retirement plan must be grounded in reality.” Advisors need to emphasize the consequences of seemingly small adjustments in the age of retirement, savings rates, market performance, health conditions, salary, and life expectancy. RetireReady Solutions specializes in equipping advisors to educate clients and assist them in developing sound retirement plans.
J.P. Morgan counsels advisors to plan for the edges as well as the average, which becomes much easier with RetireReady Solutions. Advisors use the Paycheck and Quick Gap Calculators within The Retirement Analysis Kit to educate clients in a way that drives engagement. The ability to illustrate changes in take-home pay when proposing contribution scenarios, or to stress-test retirement scenarios in real time, often leads to higher AUM.
Drawing on more than 30 years of experience, RetireReady Solutions provides advisors with the tools needed for engaging, personalized education that motivates participants to take action. See how other 401(K) advisors have found The Retirement Analysis Kit to be a powerful and effective educational tool with their clients, and read our 401(K) Whitepaper to learn more.