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and for those advisors who are ready and willing to ride on the hinge of change, it can breathe new life into old and outdated models and firms.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.