The conversation you need to have with your financial adviser now

Planning for this one aspect of retirement will help you maintain your sense of dignity as you age

By Liz Skinner

Jan 13, 2014 @ 12:16 pm EST

Few investors talk to their financial advisers about their future housing plans, even though the financial implications of such decisions are huge. And by not doing so, they are missing a big opportunity.

Only about 14% of advisers have helped their clients create plans for their housing during retirement, such as downsizing, moving to a retirement community or arranging for long-term housing and care, a new survey of 506 financial advisers found. Legg Mason released the survey Monday.

That's a surprisingly low number, given that 36% of income is typically spent on housing during retirement, according to the Bureau of Labor Statistics.

About 40% of advisers said they don't help their clients plan for retirement housing because investors don't ask about it, the Legg Mason survey found.

Kathleen Pritchard, Legg Mason's head of adviser business development and a managing director, said investors aren't asking about it because they don't understand the “extraordinary financial impact” that future housing choices can have on their retirement savings. Costs can quickly outstrip savings if retirement housing isn't planned for carefully, she said.

“Planning for the financial implications of housing choices should become a much higher priority for aging investors and their advisers,” Ms. Pritchard said.

Investors who have a plan for their housing needs and choices “can maintain control of the discussions and maintain their sense of dignity,” she said.

Anytime investors and advisers have in-depth financial planning conversations about retirement, the discussion should include housing options, according to Ms. Pritchard. Even clients who remain in their homes need to plan because they will need to make it “age safe.”

The survey also showed that investors and their advisers are talking more regularly about other aging challenges.

About 65% of advisers help clients with retirement savings, 34% help to pass on funds to future generations and 24% help with retirement goals, such as “bucket list” items, the Legg Mason survey found.

Even though most advisers don't talk to investors about it, advisers expect 27% of clients will downsize from their home when they are about 70, a quarter will move into a retirement community at around age 74 and 22% will settle into a facility with medical care at about 79 years old, the survey said.

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