The first time it took place, I have to admit I was oblivious to the situation. I didn’t see it coming. I was a young advisor and when I got the call I was enamored with the offer.

It was the first time a client received a buyout offer that was several years ahead of their anticipated retirement date—and we both were in love with the details.

There was a one-year severance, a pension multiplier and substantial credit for health insurance. On the surface, it was a financial no-brainer. The offer was so lucrative, I couldn’t rationalize passing it up, and to be honest, I found it pretty appealing that a large 401(k) was coming over, plus a pension rollover, since I had only been in the business for a couple of years at the time.

In the early days, I didn’t understand the psychology of retirement and put myself in the camp that retirement at any age must be good—especially if it was five years ahead of schedule. But early retirement isn’t all peaches and cream, and seducing people into it with money can be particularly harmful. This point is important when you look at the definition of seduction.

Seduction stems from Latin and means literally to “lead astray.” It usually involves using temptation and enticement to lead someone into a behavioral choice that he or she would not have made if not in an aroused state.

I realize the term seduction and arousal aren’t typically associated with retirement planning, but let’s be honest, early retirement is sexy. It’s hot, popular and what many people think they want. Frankly, a significant buyout offer can be euphoric because it conjures up ideas of endless freedom and unlimited possibilities. As a result, it can cause both an advisor and client to miss other aspects that should be considered. A variety of studies show early retirement can have a negative impact on physical, mental and social health.

• One 2016 study published in the Journal of Epidemiology and Community Health suggests that retiring early may actually increase your risk of dying early. Findings showed that healthy people who postponed retirement and chose to retire a year later than those in a comparison group had an 11% lower risk of dying early.

• A 2013 study from the Institute of Economic Affairs in the United Kingdom found that retirement increases the probability of having at least one diagnosed physical condition by 60% and suffering from clinical depression by 40%.

• A study from Cornell University and the University of Melbourne shows a striking correlation between Social Security claims for early takers and a jump in mortality. The effect is biggest on men in this scenario, who see an increase in mortality risk of about 20%.

• Retiring later appears to delay the onset of Alzheimer’s, according to the International Journal of Geriatric Psychiatry.

Can you imagine a client coming in who is excited about an early retirement package and your immediate response is, “I wouldn’t do that! You’re probably going to get depressed and maybe even die earlier than your buddies who are still working. Oh, and you might end up in a nursing home with Alzheimer’s sooner than you’d expect. But let’s look at those figures and see what we have.”

I realize many of you may be thinking, well if the early retirement plan doesn’t work out, a client could just go back to work. It just isn’t that easy. As you know, any gaps in employment can be a cause for concern with employers, and research suggests that older workers need more time to find a job than their younger counterparts. A 2014 U.S. government workers survey noted that people age 50 or older are likely to be unemployed for 5.8 weeks longer than someone between the ages of 30 and 49, and 10.6 weeks longer than people between the ages of 20 and 29. Furthermore, if your client does manage to find a new position, chances are it won’t pay as well as the one she left.

In essence, the seduction of freedom lures clients into a world that can be anything but blissful, primarily because they are giving up so many things and many times are unaware of the consequences. Retirement can create a loss of purpose, reduced social interaction and a loss of physical activity and mental stimulus.

The buyout helps replace the income from a client’s job, but most employers don’t provide any training on replacing these non-financial aspects, despite workers wanting and needing it. An Accenture survey of workers and retirees in the United States and Canada found that 82% would like more help with retirement planning, and 84% would like assistance with retirement coaching.

The problem goes beyond the statistics and a simplistic overview of the problems early retirement can cause. I have worked with numerous early retirees, and they struggle for several reasons.

First, all of their friends are still working. That leaves them with very little to do between 9 a.m. and 5 p.m., and when they do find a retired group of people to hang out with, they end up being outsiders because they are so much younger and usually have less in common with them.

The same holds true with friends who are still working. A client may have worked with the same folks for 20 to 30 years, but when they are no longer in the trenches with them, the dynamics of the relationship begin to change. Talking about work isn’t as easy, and reliving the old days only lasts for so long.

Additionally, people treat retirees differently and have stereotypes for them. Unfortunately, the mainstream assumption by many is that retirement means you have been put out to pasture and are no longer a contributing member of society. It’s harsh, and many of us are working diligently to change that perspective and the impact ageism can have on older workers, but it’s still there and doesn’t feel good when a client experiences it.

Advisors need to be aware of these things and be open to finding ways to share them with clients. I’m not saying advisors should tell clients to turn down a lucrative buyout offer and tell them to avoid retiring early. Instead, if advisors can step in and say something like, “Great, now we have a good plan in place to make sure you don’t run out of money, but we also need to make sure you have a plan to avoid running out of family, friends, good health and time.”

That’s the game-changing statement and a powerful way to reverse a trend where early retirement leads to increased chances of depression, addiction, Alzheimer’s and premature death. As I have said in previous articles, this can and should be accomplished in a variety of ways—from general conversations with clients, to newsletters, blogs, videos and more.

One tool I know a variety of advisors use is simply requesting reprints of articles like this and sharing them with clients. Other strategies could include partnering with a certified professional retirement coach, marriage and family therapist, psychologist or other non-financial retirement expert to deliver this message.

But please make sure they are trained well in this area since more and more people are calling themselves coaches just because they have access to some new software or have been trained to do pre-retirement assessments. I would also encourage advisors to get up to speed on all of these non-financial topics, because if clients aren’t already bringing them up in discussions with you, then they are talking to someone else about it.

Advisors have an opportunity to reshape the future of retirement planning by making sure their clients aren’t seduced into early retirement based on financial factors alone. Yes, early retirement can be sexy and appealing, but it can also be one of the most dangerous forms of retirement if it doesn’t include plans to replace the mental, social and physical aspects of work as well.    

 

Robert Laura is the president of SYNERGOS Financial Group, the founder of RetirementProject.org and a pioneer in Certified Retirement Coach training. He can be reached at [email protected].