For many retirees, a happy retirement may depend as much on individual personalities and priorities as on portfolio returns and spending rates, according to survey results discussed at the 2022 LIMRA conference in Chicago.

In a session last month called “Defining Success For Today’s Retirees,” Glennon Franklin, director of customer research at Denver-based financial services provider Jackson National, discussed the results of a study of the “golden generation,” as he called it—people between 60 and 80 years old who were either on target to retire or recently had retired with $250,000 in assets.

Bryan Hodgens, LIMRA’s head of distribution research and annuity research, who hosted the session, opened by noting that the five years before retirement and the first five years after retirement are a crucial decade for determining the success or failure of a retirement plan. Sixty percent of people in that 10-year period, he said, “either face an adverse healthcare event or get laid off, either of which can wreck a financial plan.”

Franklin replied that intentions and reality rarely align.

For instance, Franklin continued, roughly half of those surveyed who had not yet retired intended to keep working at least part-time in retirement. Yet among those who had retired in the past three years, less than 5% actually continued working at all.

Besides the income gap that can occur from no longer working, the discrepancy between expectation and reality can cause a great deal of unhappiness.

Advisors need to focus on these emotional implications as well as the financial ones, Franklin stressed.

Retirement is the “first phase in life where we have a blank slate in defining our purpose,” he said. As children, we are sent to school, which defines how we spend most of our time and how we think of ourselves. Later, jobs and/or family obligations are what “give us purpose, an identity,” said Franklin. “But in retirement, people hope to continue working partly to give them a sense of purpose. And if it’s not there, it’s potentially a significantly difficult issue.”

Opportunity For Advisors
Those who expected to work in retirement but don’t, and those who did not expect to work in retirement but end up having to, are both at an “elevated risk for depression,” he said. That depression can lead to serious physical and cognitive health problems.

By asking clients to think very carefully about whether working in retirement is likely to happen, advisors can help avert emotional catastrophe.

Franklin had several suggestions about how to do this. In retirement planning discussions, advisors can ask clients about what will help drive their sense of purpose when they stop working. “When clients say they will continue working [after they retire], don’t let them off the hook so easily,” he said. “Dig into it a little further.”

The importance of having a sense of purpose when you stop working cannot be overemphasized. “We know that having purpose helps you stay healthy,” said Franklin. “If you can continue to learn and grow in retirement, you are less likely to experience cognitive decline and more likely to have better physical health for longer.”

Some clients are motivated by a need for certainty, said Franklin. They value outcomes that are known. Fully 76% of recent retirees in the survey had a pension, he said, versus 59% of retirees overall. At the same time, 58% of respondents who were not yet retired also had pensions, whereas only 20% of workers in general do.

“It’s not by accident,” said Franklin. “Those who have pensions consciously chose careers that offer pensions.”

They value certainty so much that they often prefer a savings account to a stock portfolio; they are more concerned about volatility than about forfeiting return potential.

What’s more, people with pensions are more likely to buy annuities, he said, because of the guaranteed income they offer.

“Most annuity holders will tell you they don’t know why they bought one,” said Franklin. “Maybe their advisor recommended it. But pension holders will definitely tell you they want the annuity guarantees.”

This is a population, he stressed, who don’t necessarily need the extra annuity income. They have sufficient assets to maintain a sustainable withdrawal program in retirement. But annuity guarantees appeals to them nevertheless.

Savers Vs. Spenders
Another surprising finding was that those who value the certainty of annuity guarantees are savers, not spenders.

“We tend to talk about annuities as a way to spend safely,” said Franklin. “But people who are positively predisposed toward annuities aren’t particularly interested in hearing about spending. They are interested in saving.”

With clients like this, you might do better telling them you recommend an annuity to protect their savings, not to help them spend safely. “It may be a stronger argument,” he said.

In conclusion, Franklin observed that financial solutions are often presented to clients in cold, hard, factual terms. “Compliance does drive us to cite facts and figures, but that doesn’t mean we can’t be talking about the emotionality of the situation, too,” he said.

Those with sufficient assets for retirement are primarily concerned about being able to maintain their lifestyle when they’re no longer working, he said. Maintaining lifestyle may register more strongly than the idea of not running out of money.

“What retirees and near-retirees most want to know is, ‘Am I going to be OK?’” said Franklin.