Traditional retirement planning is fatally flawed. These detrimental faults aren’t recent discoveries; they have just become more noticeable and are spreading like a wild fire. The problem lies in many of its underlying principles, which assume that:

It’s an interesting list because it’s common to hear how the retirement landscape is changing, but it’s not often translated into how it may be, or already is, impacting our firms and business models.

A terminal diagnosis like this is never easy to take, and while some advisors may seek a second opinion, the symptoms are obvious and far reaching. Factors such as social media, longevity and health-care costs are just a few of the elements that are driving the proverbial nails into the traditional retirement planning coffin. 

Social media is playing a key role in the transition, but not because it offers advisors the opportunity to reach prospects and clients like never before. Instead, it’s the result of people finally having both the means and a desire to talk about retirement with others.

If you think about pre-Facebook generations, like the parents of baby boomers, they stressed self-reliance and a philosophy that suggests a person was weak or incapable if they couldn’t take care of themselves or figure it out on their own. They didn’t openly talk about their problems or family life. They just accepted it or worked around it, shrouding much of their life in secret.

Baby boomers, on the other hand, are openly talking about everything retirement, including all the gory details. They are coming to understand that life in retirement isn’t automatically better or easier unless they take steps to make it that way. Therefore, advisors need training, tools and resources to help clients plan for the non-financial aspects of life in retirement. 

 

Furthermore, traditional retirement planning helps clients map out how their financial circumstances will be changing, but doesn’t help them figure out how they might personally need to change. This focus on the situation instead of the person is the primary reason why people fail at retirement. They understand the impact of something tangible like their income decreasing, but can’t easily apply the same need to adjust intangible things like their thoughts and feelings.  

Now consider the impact that longevity has on the situation. We all know that people are living longer, but clients struggle to wrap their minds around what it will take to live to 95 or 100. Personally speaking, how are they going to fill their time, stay relevant, healthy and connected for 30 years? 

Clients don’t necessarily realize the amount of time and energy it takes to replace the things that work seamlessly provides for them. Combine that with the fact that some clients actually like what they do for a living and get along with co-workers, and the idea of giving it all up because they reached a certain age or savings level, doesn’t seem that appealing.   

The daunting task of saving enough money to support their desired lifestyle for 30 years is also becoming unrealistic. Filling their time, replacing their work identity, staying connected, as well as keeping mentally and physically active isn’t necessarily free. 

Then you throw in the costs of health care in retirement, and maintaining a decent standard of living gets tricky. Health-care costs are one of the most difficult expenses to assess over an extended period of time. While there are general studies and guidelines, the costs of prescription meds and supplemental health-care plans can be devastating to a fixed-income budget. The problem is the true impact of these added costs doesn’t usually show up until clients are 10-15 years into retirement and unable to do anything about it except reduce their lifestyle. 

Overall, the idea that traditional retirement planning is dying shouldn’t be consider sad news or come as unexpected. When one door closes, another one opens up, and for those advisors who are ready and willing to ride on the hinge of change, it can breathe new life into old and outdated models and firms. 

As a result of this change, a new underground subculture of wellth management is emerging. That’s not a typo, it’s a new breed of advisors who are embracing the need to help clients plan beyond the dollars and cents of retirement and address the fatal flaws of traditional retirement planning. 

 

To start, these new wellth managers understand that retirement planning can no longer be compartmentalized. In other words, we can’t just help clients institute certain rules for investing, mandate specific habits for saving, and in the process, let them sacrifice their health or relationships.

Clients need to know that they can’t selectively plan their way to—and through—retirement because at some point their health, relationships, mental strength and spirituality will come into play. It could happen on their first day of retirement or 20 years into it, but rest assured, they will cross that path when their lack of habits and discipline in others areas of life will be brought into question … and money won’t be the answer. 

What’s exciting about this major transition is that new topics and paths for advice are opening up. Two of the most electrifying are retirement coaching and entrepreneurship.

Retirement coaching in its most basic format is a process for helping clients think about and plan for the non-financial aspects of retirement. It includes a process for making clients more aware of what they may face personally as they make the transition into retirement and helps them begin to adapt mentally and physically. It helps clients avoid wasting the first and most valuable years of retirement trying to figure it out on their own. 

The other major trend underway is retirement-based entrepreneurship. Many of traditional retirement planning’s fatal flaws can be alleviated by starting a business because it not only provides many of the same things their work life offered, but done correctly, can also provide additional income to support longevity and health-care costs. 

It also meets clients where they are at. Baby boomers, in particular, want to be a part of something bigger than themselves, they have a deep desire to have a positive impact on others and are usually harboring a passion or hobby they would love to turn into cash flow. 

The concept also has a ton of appeal to advisors simply because they themselves are business owners. In other words, the learning curve to begin to provide advice or suggestions to people in this area has a low barrier for entry… plus it’s a ton of fun to talk shop.

The idea that traditional retirement planning is on its deathbed and may be hazardous to a client’s retirement well-being may mean more disclosure for advisors. Something similar to the Surgeon General’s warning on cigarettes being placed on the side or back of every financial planning binder: “Traditional planning by itself may be dangerous to your life in retirement and may cause a failed transition.”

While I don’t see regulatory agencies requiring this disclosure just yet, savvy advisors can get ahead of the curve by helping clients become more aware of traditional retirement planning’s fatal flaws. Furthermore, they can use the emerging concepts of retirement coaching and entrepreneurship to help deal with the tragic loss of it, and in the process, breathe new life into their practice and clients.

Robert Laura is the president of SYNERGOS Financial Group, the founder of RetirementProject.org and the creator of the Retirement Wellness Report and DividendPaycheck.org. He can be reached at [email protected].