Helping Clients Who Want A Retirement They Can't Afford - Kitces & Carl Ep 203
Michael Kitces and Carl Richards discuss how a financial advisor can tell clients their retirement spending isn't sustainable, especially when a previous advisor said they were fine.
The gist
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Richards suggests not trashing the previous advisor, and instead asking permission to be professionally candid and walking the client through the trade-offs.
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Richards advises showing rounded confidence numbers like 90 or 95 rather than decimals, since projections carry real fuzziness.
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Kitces renamed probability of success to probability of adjustment after a bond trader client saw a 70% result as good odds.
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Kitces models on screen what cut would be needed in 5 to 10 years, using RightCapital and Income Lab's guardrail tools.
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Kitces then asks clients exactly what they would cut, like $32,000 a year; those who can't name enough often change behavior.
Michael Kitces uses it
"I really adjusted over the years how high of a Monte Carlo projection I anchored to. I like to see 90 to 95% kinds of things for a long time. And came way, way down from that."
▶ Play at 25:21
Michael Kitces uses it
"And so still to this day I stopped calling it probability of success and started calling it probability of adjustment... There was a 70% chance that they were on track and a 30% chance that they were going to have to make adjustments, and they were fully prepared to make adjus..."
▶ Play at 18:32
Michael Kitces uses it
"So I put that into my planning software, MoneyGuide at the time, RightCapital these days. I put that in my planning software. I pull it up with the client."
▶ Play at 19:483 creators recommend it, including Liz Miller and Ryan Townsley.
See all on the RightCapital page
Michael Kitces recommends it
"I'll give a shout-out to Income Lab, which has actually built some really cool tools to model adjustments more dynamically, to model guardrails, so you can see where clients are drifting too far out of whack."
▶ Play at 20:242 creators recommend it, including Ryan Townsley.
See all on the Income Lab pageWhat they recommend · 4 picks
"And so still to this day I stopped calling it probability of success and started calling it probability of adjustment... There was a 70% chance that they were on track and a 30%..."
"I'll give a shout-out to Income Lab, which has actually built some really cool tools to model adjustments more dynamically, to model guardrails, so you can see where clients are..."
"So I put that into my planning software, MoneyGuide at the time, RightCapital these days. I put that in my planning software. I pull it up with the client."
Michael and Ryan agree on 3 things
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