By Robert Laura
The only guarantee that comes with retirement is the fact that at some point every retiree will die. That may sound like the perfect conversation to avoid, or at least postpone, especially since it's not a typical part of the retirement planning process. But therein lies the problem. End-of-life conversations, from the proper perspective, can add immense value to the client-advisor relationship by helping clients create a no-regrets retirement plan.
According to recent reports, the average length of retirement has risen from 8.1 years in 1950 to almost 20 years in 2007. A significant increase that can, in large part, be attributed to improvements in health care as well as the benefits of early retirement and maintaining a healthy lifestyle. This evidence combined with retirement's sole guarantee puts an obvious premium on "time" when it comes to retirement planning.
Obviously "time" related questions and assumptions are already a major part of the traditional planning process. Factors such as life expectancy, inflation and how long a client's money will last are all important components of a good retirement plan. However, the way in which these very questions and assumptions portray "time" in retirement actually robs clients of its true essence, therefore causing advisors to miss important opportunities with clients.
As professionals we help clients envision and plan for romantic walks on the beach, worldwide travel, watching their grandkids graduate from college and all things wonderful that will take place in the next five, ten or even 20 years. Yet, despite all of our efforts, at best we can only guarantee a client's current breath. We have no idea what tomorrow will bring and, in my opinion, filling retirement plans with long-term hopes and dreams alone inhibits clients from making the most of the present, including full involvement with family, friends and community.
Reality TV validates the need for advisors to help clients identify and concentrate on the most important aspects of their life. Oftentimes, I find myself caught up in shows like "I Shouldn't Be Alive" or "When Animals Attack," the ones where real people discuss how they survived extreme and frightening situations that could have resulted in death. Of particular interest to me are the things they said or thought that helped them get through their ordeal and live to tell about it. To the chagrin of the financial services community, I've never heard any survivor say:
"All I kept thinking about was I had to convert my IRA to a Roth before year-end."
"I hadn't taken my RMD and knew if I didn't survive my family would be unnecessarily taxed."
"I kept saying to myself, 'Hey, I earned those dividends, and I'm going to get them.'"
"I knew if I didn't get out of this mess my CD would auto renew."
Whether it's in real life, a book or a movie, few if any use their last breath to discuss financial things. That's not to say there isn't value in them. I'm simply suggesting that advisors have the opportunity to help clients make the most of their retirement years by not only helping them look to the future but to also help them make the most out of each and every breath they take.
To help clients gain a new, more present perspective I adapted George Kinder's popular three questions to help prospective clients put their retirement priorities squarely into place. In my book Naked Retirement, I created a simple one-page worksheet that asks clients to first describe what a perfect retirement will look and feel like. Then a second and more poignant question invites the client to re-examine retirement if they discovered they had only five years to live. Finally, the third and most powerful question asks clients what they would regret if they had just 24 hours to live. The phrasing of the last question is important because instead of limiting the "time" and scope of question to what they would and could do in 24 hours, advisors can get a broader glimpse into what's truly important to how a client should spends their time in retirement by examining the potential for ten, 20 or even 30 years of regrets.
What you're likely to find with this exercise is that client answers to the first and most generic of these questions tend to identify things we all use to compare ourselves to others, like money, where they'll go, what they'll acquire, etc. But as you walk them through the second and third questions, clients truly personalize their retirement and they begin to see a path to a meaningful retirement filled with less, unresolved regrets. While fairly simplistic in design, this approach provides immeasurable value, particularly in situations where retirement changes suddenly.
Once they have completed the exercise, advisors can add more value by helping a client create an ideal day, week and month that incorporates their new retirement priorities. Doing so will help clients create a no-regrets retirement plan that motivates them to make the most out of everyday and breath that they are given instead of depending on an uncertain future.