We can’t gloss over or ignore these details or assume they will fall into place if we just focus on numerical values and representations. What clients need is a written plan with concrete action steps to replace their work identity, fill their time, stay relevant and connected, and keep mentally and physically active. Without this, there’s a major void in any retirement calculation/decision, making it foolish to use traditional methods alone.
Additionally, an advisor needs to be able to understand and explain to clients how things will change as they move into retirement. Just as the equation in the last row changed from addition to multiplication, so does life in retirement change.
People assume that retirement is nothing but a big plus sign. That more freedom, time and leisure will suit them well and result in the life they have always dreamed of. But the reality is that problems, stress and boredom can multiply if people don’t have some structure, goals, direction and purpose for this phase of life.
Yes, no longer going to work means clients have more time and fewer distractions, but if they don’t find things they like and value to fill them up, a darker side of retirement can creep in and take over.
It’s time to wake up to the fact that retirement doesn’t equal happiness. There is no direct correlation. The joyful, positive feelings come from other things—impact, involvement, love and generosity to name a few. In other words, retirement is not a feeling but a stage of life requiring concrete plans and action steps to foster positive feelings.
It’s also worth pointing out that retirement doesn’t eliminate work, just reorients it. Being a successful retiree, couple, friend, grandparent, volunteer or gig employee takes work. It’s just a different type of work than what the client was doing to earn a living. But nobody talks about it that way, including advisors, who just want to focus on the numbers and argue that the right answer depends solely on having enough money or reaching a certain age.
Getting back to the brain teaser, now that we know that the guy in the last row has a pair of shoes on and a ribbon in each hand, you could come up with a few different answers depending on how you did the calculation. If you started left to right in order, you would get: Shoe (5) plus guy (5) plus a pair of shoes (10) plus a pair of ribbons (4) equals (24) which needs to be multiplied by one ribbon (2) to equal 48.
Unfortunately, this is wrong because in math there is a process called PEMDAS, an acronym for “parenthesis, exponents, multiplication, division, addition, subtraction.” Basically, this tells you how to approach an equation. First, all exponents should be simplified, followed by multiplication and division from left to right and, finally, addition and subtraction from left to right.
What that means is that you have to approach each equation in a specific way. The same is true with retirement planning calculations. Following this concept, advisors must first and foremost simplify all of the exponents. This reiterates my earlier point, that before we do any multiplication, division, addition or subtraction we have to look at the person and get that piece of the puzzle right.