We all have problems, right? I had a pretty big one recently and even knew it was coming.
We were getting ready for a family party at our place when my wife said, “It feels really warm in here, is the AC working?”
I was feeling a little toasty now that she mentioned it, and so I began to break down what was going on. I started by checking the thermostat to make sure the air was on. Then I moved to the vents to see if cool air was still blowing. Finally, I walked out to the AC unit to see if I could find any issues there.
When I arrived, the line to the furnace was frozen solid. We had a major problem, and I was feeling stressed. This was exactly the wrong time for something like this to happen, which made me begin to wonder what else could go wrong. So I began to wonder if we had enough propane for the BBQ grill, if we would run out of food or drinks, or what if I undercooked the hamburgers or chicken and people got sick.
It’s interesting how stress impacts our lives and daily routine. Something as simple as losing access to cool air can completely derail our thinking and change our view. My AC going out is definitely a first world problem and something that’s relatively easy to remedy, especially since we were warned that it could go out soon by our home inspector when we bought the house.
But being aware of things that may come up and even break in retirement isn’t part of the traditional planning process yet, and can leave clients feeling anxious and stressed about the transition. Many advisors are surprised to learn that almost 20 of the 43 most stressful life events can come near or in the early phases of retirement.
That’s a very powerful statistic for advisors to know and have in their back pocket—primarily because it provides both scientific evidence of the need to plan beyond the dollars and cents of retirement, but more so because it’s the perfect way to create bridge conversations.
Bridge conversations are those that take an advisor from just talking about saving and investing, to helping them plan for everyday life in retirement. These topics are not only becoming more and more important as advisors look for ways to differentiate their practice and avoid fee compression, but advisors must also learn the skill of directing these discussions.
In other words, advisors can’t just rattle off a bunch of stats and hand their clients some sort of workbook or goal questionnaire and think that it will make an impact. They have to know what’s behind the science and why it’s important.
The information on stress in retirement comes from what is referred to as the Holmes and Rahe Stress Scale. Long story short, back in the late 1960s, psychiatrists Thomas Holmes and Richard Rahe studied how stress can contribute to illness. They surveyed over 5,000 medical patients and asked them if they had experienced any of a series of 43 life events in the previous two years.
They labeled each of these events as a Life Change Unit (LCU) and gave each one a "weight" in the scale—meaning some events are more stressful than others. The larger the number of LCUs for an individual, the more likely the patient was to become ill.
For advisors, this scale and the subsequent 43 factors can be a great handout, discussion or newsletter article that raises awareness around the need to plan for the non-financial aspects of retirement. Advisors can view a list of the 43 items here. You will notice that the 10th most stressful event on the list is retirement itself!
Below, I have pulled out several of the more prominent factors related to retirement.
• Death of a spouse (Married clients may live alone for some portion of retirement.)
• Divorce (Grey divorce rates continue to climb.)
• Death of a close family member (As we age we lose more family and friends.)
• Personal Injury or illness (think cancer, Parkinson’s, Alzheimer’s or other diagnosis)
• Fired at work (in terms of retirement, forced into retirement)
• Retirement
• Change in health of a family member (aging parent with Alzheimer, spouse with cancer, special needs adult child)
• Sex difficulties (Our bodies change as we age.)
• Change in financial state (Being on a fixed income can cause a lot of retirement arguments.)
• Death of a close friend (impacts social network)
• Change to a different line of work (Retirees with part-time jobs aren’t always happy with the gig.)
• Change in number of arguments with spouse (They tend to go up with more time together in retirement.)
• A large mortgage or loan (Clients not having their home paid off can add stress in retirement.)
• Son or daughter leaving home (Hardest part of raising kids is when they leave.)
• Spouse begins or stops work (changes the routine, roles and expectations)
• Change in living conditions (more time together, aging parent moving in, adult kids coming back home)
• Revision of personal habits (Personal activity will change and if married can disrupt partners routine.)
• Change in residence (downsizing or re-locating)
• Change in social activities (While people think they will do more, they often do less with friends.)
• Change in eating habits (in the refrigerator more and other stresses can cause snacking)
As you can see, retirement can usher in a host of issues that clients may need to deal with or face. Think of someone who is forced into retirement, gets a part-time job and then decides to downsize to save money and be closer to their aging parent. Or the wife whose husband retires at the same time she is diagnosed with breast cancer, while her youngest heads off to college, and her mother recently passed away. In some cases, these would be the lucky ones based on other situations I have come across.
It's not only much more overwhelming than dealing with a broken AC unit, but often times people don’t know who to call, and there are surely no insurance policies to fix a broken retirement. Which is why, advisors need to find ways to have these bridge conversations, and like our home inspector, make clients aware of what might break in or near retirement.
The other thing that this list and article point out is that the fear of running out of money is pretty minuscule when compared to the fear of running out of time, family, friends or health—which makes for another great bridge conversation. Saying something as simple as, “Our goal in working with clients is to not only make sure they don’t run out of money, but hat they also make the most of their time, health, family and friends.”
Like other professional services, advisors have the option to have these bridge conversations themselves or farm them out to other professionals. There is an entire industry of trained retirement coaches who are working with advisors and other organizations to add these more personal interactions.
Whether it’s seminars, workshops, one-on-one meetings, group sessions or a series of online blogs, advisors who have the knowledge and skill to introduce power statistics and information like this with clients can add value to their relationships, play a bigger role in the lives of their clients and help clients avoid feeling unprepared for what retirement may throw at them.
However, it’s important to point out that these can’t be shallow or artificial conversations. Bridge conversations have to be real, stimulating and supportive. As many of you know, a couple years back AARP had its Life Reimagined program. On the surface it looked appealing, but it fell short for one simple reason in my opinion; all of the information was very generalized and didn’t provide enough context and support.
Advisors who want to help clients plan for everyday life in retirement, need to be able to help clients pinpoint where they are at in the transition, normalize their thoughts and feelings, while guiding them through the years and events ahead with timely insights, tools and resources—a process that can be more enjoyable and fruitful than even the best year of investment returns.
Robert Laura is the president of SYNERGOS Financial Group, the founder of RetirementProject.org and pioneer in Certified Retirement Coach training. He can be reached at [email protected].