Retirees are redefining what they consider to be success in retirement, meaning advisors will have to adjust their strategies on how to better prepare their clients, according to a new survey published by Edward Jones and Age Wave.
Retirement savings need to last longer if they are to sustain a retiree’s longer lifespan, according to the survey's authors. Many retirees and pre-retirees are facing unforeseen changes, both good and bad, and advisors must help them develop the flexibility to cope with those changes.
The “Resilient Choices: Trade- Offs, Adjustments and Course Corrections to Thrive in Retirement” study questioned about 7,034 retirees and pre-retirees and found that success for participants was different than it might have been defined in the past.
“The way they express their hopes, and their dreams is so different from their moms and dads,” said Lena Haas, head of Wealth Management Advice and Solutions at Edward Jones, during a webinar last week announcing the results of the survey. “Retirement is not seen as what their parents might have thought of as a time of leisure … retirement is really seen as a new chapter with new choices and opportunities and also some new challenges.”
There are a variety of things retirees and pre-retirees want to do and are doing in retirement. Twenty-six percent of retirees said they are working while 50% of pre-retirees said they plan to work in retirement. Meanwhile, 19% of retirees said they are volunteering while 39% of pre-retirees plan to volunteer when they retire.
The webinar participants discussed dealing with major life events and course-correcting to accommodate those changes, which could mean everything from losing a spouse to unexpected health expenses, or positive windfalls such as starting a new job or reducing or eliminating certain expenses.
“The retirement journey is not a straight line, it’s not you plan it once and everything falls into place,” Haas said. “It becomes this very dynamic journey so there are curveballs (minor challenges), cannonballs (major challenges that come our way) and many positive windfalls along the way.”
Many have endured these curveballs and cannonballs: 69% of men and 81% of women in the study said they suffered an unexpected event. The participants rated the most disruptive event and losing spouse was the highest at 77% while divorce was 58%, and a significant financial setback got 56%.
Those curveballs alter a retiree’s income stream and have a major impact on their lifestyle going forward. Other curveballs could impact when a person decides to retire as that decision may not be entirely up to them. Thirty percent of those surveyed said they were forced into retirement due to their health or the need to take care of a family member.
Going into retirement, pre-retirees should work with their financial advisor to have a plan and be ready to modify it when certain situations come along, Haas explained.
“It’s not a bad idea if you have a financial advisor to talk about scenario planning,” she said. “You might want to work longer, but just in case you retire early what adjustments can you think of that you are ready to make?”
Retirees and pre-retirees report they are better off working with a financial advisor than without. Of those surveyed, 27% of retirees and 30% of pre-retirees are working with an advisor. Working with an advisor inspired confidence as 94% of retirees and pre-retirees who are working with an advisor said they were more likely to say they could handle unexpected financial challenges as opposed to the 78% who were not working with an advisor.
Finally, an advisor can help retirees understand the value of comprehensive financial planning and advice as 63% of retirees and 70% of pre-retirees are looking for a more holistic approach from their advisors.
Edward Jones helps its advisors through the use of a program called Deep Discovery. The advisors ask clients a series of deeper questions to understand what, and who is most important to them, and why. Advisors are trained to approach each interaction with curiosity, active listening, and empathy, the firm said.
Once the process is completed, the advisor establishes tailored strategies and lifelong relationships to help clients achieve their personal and financial goals, according to Haas.
“This study really reinforces that in order to thrive in retirement you need to have a thorough plan that isn’t just about the finances,” she said. “It’s about holistic evaluation of what’s important.”