The room suddenly went silent and my mind began to race. I thought to myself, “Are you crazy, no one thinks that making $100,000 a year is too small of a goal…and what the heck do you mean, don’t limit your real potential to just money?”
I was speechless and felt completely blindsided by his words. I wasn’t sure if I should be scared or excited.
It was the first time, someone gave me permission to step off the beaten path and to think beyond the dollars and cents of life. I was encouraged to thrive instead of merely survive or accept the status quo.
I think something similar needs to happen in retirement planning. We need more creativity, imagination and pattern-interrupting conversations. We need to move the needle of retirement planning from merely functioning in retirement to flourishing during it.
This is significant for advisors to comprehend because the advice world is changing—no, not because of robo-advisors or fiduciary rules, but because of Positive Psychology.
The Positive Psychology movement started in the late 1990s when Martin Seligman pushed members of the American Psychological Association to study human flourishing instead of the more traditional focus on disease and deficiency. What has resulted, is a growing field focused on helping people lead meaningful and fulfilling lives, through the principle of PERMA: Positive Emotion, Engagement, Relationships, Meaning and Accomplishment. In other words, scientific evidence on how to move people from simply functioning to actually thriving.
Positive Psychology is quickly becoming a key aspect of retirement planning as many of the tools, research and literature can easily be applied to successful aging and life in retirement. As a result, it emphasizes the need for advisors to get more soft-skills training.
I personally despise the term soft skills because it implies something meek, easy or touchy-feely. In practice, a better description for them would be, applications of psychology, or in this case Positive Psychology. The reality is, as financial professionals we need to be encouraging our clients to invest in themselves, their mind, body, spirit and relationships. And the more we can use science and evidence-based tools to improve the lives of our clients, the more credibility we add to the profession, not to mention the value we add to the planning process.
One example of this at work is something referred to as the positivity ratio. Just as advisors use the 4 percent rule as a talking point for retirement withdrawals, the positivity ratio can serve as a foundation for managing emotions in retirement. Research suggests that in order for people to thrive and feel positive about their use of time and role, they need three positive emotions for every one negative emotion. We all know that negative emotions are more powerful and potent than positive emotions, so they need to be counterbalanced by more positive emotions.
Unfortunately, most people, especially those that are retired, fall short of the 3:1 ratio. Truth is, clients can be blindsided by negative emotions in retirement and feel insecure about their identity and future. With fewer things to do and less contact with others, they need specific strategies to increase the number of positive emotions they experience in order to feel satisfied with life.