I was sitting across the table from a nice couple who were near retirement. We were going through the normal questions when it came time to talk about longevity and how long their savings may need to last. So, I asked the couple about their family health history and how long they thought they might live.
In typical fashion, the couple looked at each other, unsure of how the best to answer the question. Then the husband murmured, “I don’t know, maybe 80 or 85?”
As they turned their gaze back to me, I replied, “To be conservative, we should run your numbers to 95 or 100,” humorously adding, “I don’t want you to reach 86 or 87 and come knocking on my door to stay with me.”
They both chuckled, but the husband was quick to chime back in, “95 or 100? If I make it past 85 just take me out back and shoot me.”
Once again, we laughed, however, the fun was short-lived as his statement hit me like a ton of bricks. For the first time, it became crystal clear as to the problem with such a statement and the profound impact it will have on both the financial services industry as well as within human resource departments.
What that seemingly simple, and all to cliché statement, made me realize was that many people look at the process of aging in retirement the wrong way. They perceive it as a linear process or what I would refer to as assembly line thinking. Where life functions in a conveyor belt fashion and any new parts, or years in this case, are added to the end of the line. Therefore, people think that because they are living longer, they will be older (and less capable) for more time.
But that’s not what is happening. Instead of extra years being tacked on at the end of the line, superchargers are being installed near traditional retirement age. These supercharges are the reason 60 is the new 40 or 70 is the new 50. As a result, baby boomers feel decades younger than their parents did when they approached retirement. As a result, they are throwing out the old playbook once again.
Essentially, boomers are ushering in a late-stage era of life, where they have 10-20 more years of productive and capable working years when compared to previous generations. But here’s the deal. They don’t want to ride off into the sunset, play golf or hang out at the senior center all day. They want to start a business, go back to school, create a non-profit or take a new career path, to name a few.
That translates into the need for two things to take place that aren’t currently happening. The first will require financial professionals to break a cardinal rule: Touching retirement assets before full-time retirement or age 59 ½. Even mentioning it feels sacrilegious, which is why it’s so important for advisors and clients to start being open to new ideas and approaches to meeting both their personal and financial needs during these bonus years.
As an industry, we have to stop medicating people to believe that if anyone touches their assets for any other reason than getting old, they will end up homeless or totally dependent on their family or the government. Retirement plans need to start becoming more fluid and flexible. They should have room for people to step outside the box and be more and do more now.
Furthermore, advisors need to start having these new conversations, especially with boomer clients because they can feel something moving inside of them, but they can’t make total sense of the thoughts and desires. Many are worn-out from years of the corporate grind and don’t feel the connection between their job and the people it impacts outside their office walls or company grounds. They’re shifting their focus from accumulating a giant nest egg to a desire to be part of something bigger and better—to have a positive effect on others—and don’t necessarily want to retire from work, rather they just want to work in the right situation and retirement. So, they need permission and support to turn those thoughts and feelings into actions.
Along those same lines, clients are also going to be looking for, and eventually demanding, the same flexibility at work. Clients want and need career counseling that helps them strike a balance between this renewed sense of being more at retirement age without jeopardizing the many benefits that employment actually provides. More and more people will be seeking work roles that offer purpose, income and time away to honor things like family, friends, spirituality, physical health and emotional well-being. In other words, the new era of retirement will be defined by freedom in the workplace, rather than freedom from it.
Consequently, organizations both big and small need to accept the responsibility for helping employees prepare for more than the financial aspects of retirement. This emerging corporate responsibility requires that they adjust their compartmentalized view of retirement as an isolated financial event that implies that life in retirement will be better than work life if they have the right investment asset allocation and enough money saved.
The responsibility for employee benefits, including retirement preparedness, rests with Human Resource (HR) functions. Unfortunately, many HR professionals are unwittingly providing a disservice by not addressing the non-financial aspects of retirement for their 50+ workforce, and in the process, setting many retirees up to fail on several fronts.
First, corporate retirement programs tend to overemphasize the positive aspects of retirement. They imply that life in retirement will be better, simpler and easy: That their work hours will be replaced with rounds of golf, walks on the beach, time with the grand kids and space to learn a second language or write that children’s book.
But there is nothing automatic or easy about retirement. It doesn’t just magically unfold. Employees nearing retirement have to learn new skills, adjust to a new schedule, find new motivations and create new habits. None of which is in that retirement brochure packet everyone gets, but never reads. That can cause some retirees to struggle with the transition and even regret their decision to leave—sometimes blaming their employer for “pushing them out while wearing rose colored glasses.”
We’ve all heard situations like this where a client complains, “They don’t want us old timers around,” or “They don’t care about anyone but themselves. I gave my life to the company and this is what I got.”
That’s not only bad PR for any organization, but it can also have a devastating effect on that former employee’s self-esteem. This can lead to a dark side of retirement that can include bouts of depression, use of drugs or alcohol to cope, and in the most severe cases, suicide.
Now I’m not saying it all falls on employers or advisors for that matter. Everyone plays a role in it. However, this should serve as a wake-up call to those who have the most influence over this group.
As these trends and new dynamics continue to play out, one of the likely outcomes will be turning the concept of retirement into a plural format. People won’t just retire once, they will retire multiple times from different areas of life. They will no longer see longevity or their careers in a linear format, and will be encouraged to use their financial resources to create the best possible life now, instead of just letting it just sit there with them in their rocking chairs!
Clients today, need a much more holistic approach to retirement that integrates the mental, social, physical and spiritual aspects of life after work with the financial ones. This is crucial because it enables them to use multiple factors including personal values, family dynamics, personal health and finances to decide when to retire, instead of basing such a major decision on the account balance of their 401(k) or 403(b).
The good news is that it is easy and inexpensive to rectify. Employers and advisors can use a variety of methods to introduce these important, non-financial concepts and strategies to those nearing retirement. These could include newsletters, free books and guides, videos, onsite workshops and individual coaching that encourage spouses to participate.
By doing so, both advisors and employers can stop the misunderstanding associated with aging and help clients capitalize on their bonus years by developing new strategies to withdraw money before full-time retirement and create more personally satisfying work environments.
Robert Laura is the president of SYNERGOS Financial Group, the founder of RetirementProject.org and the creator of the Retirement Wellness Marketing Program for Advisors. He can be reached at [email protected].