Several years ago, I had a client who worked at a major pharmaceutical company. He had fairly aggressive goals: retire at age 58 and move to his dream home on a lake in Northern Michigan. In his early fifties, he met with me to prepare a retirement analysis. We determined how much money he needed to save, calculated his Social Security benefits, his employer pension and his 401(k), as well as his expenses. We developed an income replacement plan for his retirement goal. He followed all the advice in his plan, including paying off his mortgage and increasing retirement savings and at age 58 he put in his retirement notice. He rolled over his 401(k) into his IRA and began to take monthly withdrawals to meet his income needs. This was a textbook case of good financial planning: Goals were set, analysis completed, and the plan worked. The client met his goals and I felt like a success.
The client moved to his dream home near Traverse City. However, a few months later, at his regular account review, the client stunned me by saying, "John, there are days when I have done everything I can think to do and by 10 a.m. in the morning I am drinking beer and eating peanuts." While, this might sound fun once or twice, it certainly isn't what most people want to look forward to for the rest of their life, which could be 20 or 30 more years. In a separate conversation, the client's wife told me that she was very concerned about their marriage and they were driving each other nuts. At that point, I realized that instead of successfully helping this family transition to retirement, I had actually failed the client. While we had done a great job on the numbers, we failed to address two critical questions about life in retirement:
1. What will provide meaning and purpose to your life?
2. Where will your social interactions come from?
The client had figured out that he wanted to stop working and where he wanted to live, but not what about that would provide a sense of purpose and meaning. For most people, purpose and meaning comes from pursuing something that we love or working towards a higher goal, typically in connection with other people.
The second critical revelation that I had was that for most of us (especially for men) most of our social contact comes through work. Even if we don't go out to dinner and socialize with our co-workers, we do have regular interaction for 40 hours per week at work. Once we retire, nothing will automatically replace that social contact. As financial planners, we do a great job on the numbers. But just as important is helping our clients stay true to the purpose and people questions. In other words, asking good, probing questions that help clients come up with realistic plans to ensure they have purpose, meaning and social contact after they stop working. At my firm we call this the beer and peanuts talk. We want to make sure that you don't get up at 10 a.m. in the morning and start drinking beer and eating peanuts.
The importance of having purpose and meaning in your life after retirement is starkly illustrated by the comments of Bruce Leech in Inc. Magazine's November 2010 issue. After he retired, "he was alright for the first few months. He took a vacation, spent time with his children, flew his airplane and worked on his investments. After a failed attempt to work from home, he rented an office on Michigan Avenue. That's when it hit him: 'I got real alone. My friends were still working. My kids were in school. There was no one to hang out with. I had nothing to do. People did the obligatory, "how are you doing, must be nice to be retired." I hate that word. I felt totally insignificant.'" Work provides not only income, but for many people, a real sense of purpose and even identity. Indeed, the title of Inc.'s article is, "What Am I, If Not My Business?"
Perhaps looking at some of our more famous "retired" public servants can shed some light. Bill Clinton famously talked publicly about his legacy several times near the end of his presidency. Jimmy Carter arguably has been more effective as a retired President than he was when he served in the White House.
Before retiring, it is critical to have a plan about what activities are going to provide meaning and purpose to the retiree's life. People who are charitably inclined often choose to get involved with volunteering. Many people want to spend more time with their family, and clients are often excited about the opportunity to babysit grandchildren or spend time visiting their kids. More and more often, people are retiring to take care of or spend time with their parents. This can be a drain on emotions and energy, but certainly meets the purpose and meaning prerequisites.
There is often a pent up desire to pursue leisure activities. Many people express an interest in developing their golf game. Others want to do woodworking, sewing, knitting, bowling or any number of other interests. Some of these, especially group sports such as golf or bowling, do help to fulfill the need for social connection. However, many people will find that playing golf several times a week for the rest of their life soon begins to feel empty. Getting better at golf may end up being a goal which doesn't satisfy the need for purpose and meaning.
One thing we caution our clients is not to get locked into a sense of linearity. In other words, the traditional or idealized American retirement timeline says you go to school for 20 years, then you work for 30 or 40 years, and then you retire and have leisure for the rest of your life after retirement. However, retirement experts such as Ken Dychtwald are reporting changing patterns of cyclical retirement lifestyle rather than a linear one. In other words, many retirees are finding the most satisfying life after full-time work involves periods of leisure interspersed with periods of volunteerism, and then perhaps short-term consulting work or part-time work. So rather than school-work-leisure-death, the pattern is changing to retirement followed by leisure and vacations, volunteerism, family time, and other work in an ongoing cycle. In fact, I have seen this pattern in my own parents' life.
Six years ago they sold their insurance agency and have had several excellent vacations to Europe, New Zealand and other great places, including two or three months at a time in the winter in warm destinations in the United States, such as Florida or Arizona. They also have become very active in volunteer activities in their local community. My mom has volunteered to help second graders with their reading. They both donate time to Habitat for Humanity. My mom plays French horn in the community band. From time to time, they also take on part-time jobs. My dad substitute teaches just at the select schools where he most enjoys the atmosphere and he took a job working at Sears for a few months before a trip. When he got back from the trip, the manager offered him his position back, but the hours were not conducive to his lifestyle so he didn't take the job. So in their case there are periods of leisure, volunteerism, and work that help to provide purpose, meaning, as well as a variety of social contact.