Increased longevity, rising wealth and more complicated expectations are offering financial advisors a remarkable opportunity to help clients live up to a third of their lives in retirement, according to Maddy Dychtwald, co-founder of research firm Age Wave.

“We’re in the middle of a longevity revolution,” Dychtwald said in this morning’s keynote address at FA’s Invest in Women conference. “It’s great to help younger people, but older people really need your help—not just in preparing for retirement but in getting through retirement. The amount of time spent in retirement has tripled since 1935. The planning for that is a lot more complex than it used to be, and once you’re in retirement, you still have to plan.”

A recent study that Dychtwald was involved in, "The Four Pillars of the New Retirement: What a Difference a Year Makes," gives evidence of how retirement is changing, she said.

This latest report by Age Wave, the Harris Poll and Edward Jones follows up on a 2020 inaugural study that polled 9,000 participants across five generations on their retirement-related hopes, dreams and fears. Given that the Covid-19 pandemic touched everyone who participated in the first study, it should be no surprise that the findings for 2021 revealed that the idea of retirement has been reshaped, Dychtwald said.

“We did this smack in the middle of the Covid pandemic, and so we got to see what’s really in the hearts and minds of Americans,” she said. “The concept of retirement is transforming.”

Dychtwald pointed to several trends that are contributing to this change. First, the population of people close to or in retirement is massive. “Two-thirds of all people in the history of the world over 65 are alive right now,” she said. Second, she continued, “life expectancy has skyrocketed. On the first day of the 20th century, the average life expectancy was 47. On the last day, it was 78.”

And third, a shift in wealth to older citizens has enabled new ways of thinking, as more than 70% of the country’s total wealth is held by people 50 years old and older. “In general, they’re thinking about retirement as a whole new chapter in their lives,” she said. “Yes, 22% say rest and relaxation is what retirement is all about, but 55% want to discover new purposes, new passions and a new way of being in the world.”

Of the remainder, 15% think of retirement as a continuation of life before, and 8% perceive retirement to be “the beginning of the end,” according to the study. “That’s obviously a little sad,” Dychtwald said, “but for most people we hear a big word repeated over and over, and that word is freedom. More freedom from responsibilities and worries, and freedom to pursue your dreams and passions. For these people, retirement equals contentment.”

According to the survey, the four pillars in this reinvented third chapter are health, family, purpose and finance, all of which are weighted pretty evenly among each other and also weighted the same for men and women.

“Family is the heartbeat of retirement, and supporting loved ones is the number one ideal role in retirement. In fact, during the pandemic, those Americans who could help and support family members who were struggling, they stepped up and many of them acted as a family bank,” Dychtwald said. “That generational generosity is beautiful in a way, but potentially dangerous.”

Financial advisors have a real role in building in some guardrails for how retirees will help family so that those retirees don’t end up needing help that younger family members may or may not be able to provide in future years, she suggested.

According to the survey, 92% of retirees said that having purpose is essential to successful retirement. “And when 92% of people agree on anything, it’s pretty amazing,” Dychtwald said. “We’re hearing this loud and clear.”

And purpose is one of those pillars that really can impact the other pillars. For example, other studies have shown that having a strong sense of purpose reduces risk in key areas like Alzheimer’s, cardiovascular issues, depression, stroke and disability, while increasing overall health, cognitive functioning, life satisfaction and mobility, she said.

“Purpose also impacts family. Having purpose is more important than being wealthy, our survey showed. The number one greatest source of purpose, meaning and fulfillment is spending time with those we love,” she said. “Maybe it’s just babysitting the grandchildren, but it’s meaningful.”

Dychtwald said she’s been using a new term to describe retirement and that’s “time affluence.” Comprehensive financial advisors who are aware of this and sensitive to it can really connect with clients on all the possibilities of what retirement can offer. “We might be at a tipping point, a tipping point in creating a new vision for what retirement means. It’s great to relax but there should be more ways for retirees to contribute, to make intergenerational connections in their own communities,” she said.

Financial issues can increase in complexity for this demographic, the survey found, and especially when they converge with health issues along the lines of health-care costs and long-term care costs.

“Of course, you are not a health expert,” Dychtwald reminded, but being close enough to clients to talk about health and future health expectations is an important part of a financial advisor’s job.

“In 2021, we had some pretty big learnings,” she said. “Covid had a big impact on financial security. Some 50 million Americans stopped or reduced their retirement contributions, and another 38 million began withdrawing money, which as we know has all kinds of challenges connected with it.”

For women especially, the impact was felt acutely, she said, pointing to a widening financial gender gap and increased female longevity.

“When people think of the pay gap, most people talk about it as being 82 cents earned to the dollar,” Dychtwald said. “But we have to look at it over a lifetime. A woman who starts working and stops working at the same time as a man will have made $469,000 less over her lifetime. When you add career interruptions to the lifetime pay gap, that gap widens to $1.1 million.”

What clients really need and want from financial advisors is guidance, she said. They want someone who can understand them, their needs and what makes them tick. And not just in the area of finances.

“Most retirees wish they had done a better job planning for the financial aspect of retiring, but they also wish they had planned for the other pillars,” she said.