What if there was a video game where people could put on a pair of virtual reality goggles and experience life in retirement? Players could create their own avatar, live anywhere in the country, watch their computer-generated grandkids graduate from an Ivy League college, and even accept a Pulitzer Prize for their recently penned autobiography.
A perfect virtual day could start with coffee in Paris, a long walk on a beach in Hawaii, an afternoon meditation at the base of Mount Everest, then some leisurely reading of a great classic novel while sailing on the high seas. It would be perfect! Until they took off the glasses and were confronted with reality, which today includes a global pandemic, social unrest, a widening wealth gap and an ever-growing political divide. These are the goggles that our clients are looking through, and now more than ever they need more than our financial advice to sort it out.
I would love to tell you that I have all of the answers and that things are poised to turn around and get back to normal, but they’re not. Even so, we can’t risk losing our clients’ best laid retirement plans to the current mayhem that seems to be directing many people’s lives.
The U.S. Army came up with an acronym to describe periods like this in the late 1980s: It’s called “VUCA”—an acronym for “volatility, uncertainty, complexity and ambiguity.” It describes an approach for thinking and contextualizing when systems face failure and group behavior changes. Quite frankly, I think it would have been the perfect name for this pandemic: VUCA-20 instead of Covid-19, because let’s face it, these four factors describe a lot of what life looks and feels like today.
The military developed the idea in response to our constantly changing and rapidly evolving world. Since then, it has become a staple of the business world as an approach to strategic planning. As you might expect, it can also be applied to retirement planning.
It’s an important approach for a number of reasons. First, much of the research and statistics we have on life in retirement has quickly become outdated. I recently came across the Society of Actuaries’ “2019 Risks and Process of Retirement Survey,” looking at the non-financial aspects of retirement.
The survey made a number of discoveries. Eleven percent of the retirees said adjusting to retirement was emotionally challenging. Only a quarter felt that they had adjusted immediately or within a year. A little less than half said they were “somewhat happier” than they were when they first retired. Thirty-eight percent said they only occasionally feel lonely in retirement. Only 12% said they felt lonely often or very often.
The research is great, but the society also correctly noted that these results may change as a result of Covid-19. Actually, they already have. Parents are worried about their adult children whose careers and lives are being delayed or postponed. Many teachers and school administrators are now considering retirement because of the new technology demands placed on them. Similarly, many first responders are feeling constant stress and threat amid the pandemic and social unrest and are leaving the ranks in droves.
These are just some of the people we serve whose thoughts and feelings are changing—and who are working overtime as they process all of these new things.
In a world of volatility, uncertainty, complexity and ambiguity, these people might feel anxious or less motivated. They might feel their lives or careers have stalled, that they are frozen when it comes to decision making. Their health and well-being are also at risk, and that might cause them to self-medicate.
So when we take off the VR goggles, we see this list of horrors and must figure out how to cope. This also makes the VUCA approach valuable. First, it concisely frames the way people are feeling.
Second, it gives them something to grab on to at a time of volatility—rapid fluctuations in the stock market, people’s income, businesses, relationships and health. People don’t know when they will be able to travel again, freely socialize with others, go back to the office or take off their masks. Nor do they know what direction our country will be headed in the next four years.