Have you ever looked at the definition of retirement? Google “definition of retirement” and read some of the words and definitions from online dictionaries. The words include “leaving,” “ceasing,” “privacy” and “seclusion.”
Some of the definitions include phrases such as “withdrawal from one’s position or occupation or from active working life,” “permanently leave the workforce behind,” “the act of leaving your job and stopping working usually because you are old,” and “the period in someone’s life after they have stopped working because of having reached a particular age.”
You get the idea.
It connotes a conclusion, no longer contributing, your best is behind you, nothing to look forward to, not being active and engaged in life, being alone. And simply by your age, society’s messages indicate we are finished. For most people I work with, this definition could not be more inaccurate.
The current lives and futures of most retirees do not jibe with these definitions and words. Think about how “retirement” has been advertised and the message clients have received throughout their lives. These messages can have a powerful impact on how people perceive retirement. It is, for most people, the single largest investment goal they have in their lives.
Although the word “retirement” may never be removed from the financial advice industry’s vocabulary, perhaps we can help clients better understand how retirement is changing and alter the words, phrases and messaging we use to describe this time of life. It is more of a beginning than an ending.
Combine retirement with increased longevity and the effect Covid has had on how people are viewing what they value in their lives, and the resulting retirement phase of life is looking much different for a much larger group of people.
Nearly 20% of the U.S. population will be age 65 or older by 2030. And many people will have the opportunity of 30-plus years in retirement. Most people in previous generations did not have this opportunity.
But countless people want to live a life that includes a very different definition than the current narrative people see and read and are being told. They seek a retirement that’s more active, engaged, and connected with the world around us.
A 2020 study from Edward Jones and AgeWave titled The Four Pillars of the New Retirement explains this new definition:
“What makes today’s retirement ‘new?’ Increasing longevity means more people with longer retirements — making retirement a more important stage of life. Two-thirds of all the people who have ever lived past the age of 65 in the entire history of the world are alive today. … However, it’s not just the massive size of the Boomer generation that’s changing the face of retirement — it’s their attitudes and aspirations. They enjoy more opportunities and more choices than any previous generation for shaping retirement to suit their needs and expectations.”
This brings us to helping clients think about how they want to live in retirement.
An Incomplete Retirement Plan
Much has been written about retirement and it often includes terms and phrases such as “Retirement Readiness” and “Retirement Confidence,” just to name two of the more popular phrases. Some of these phrases are used in marketing — white papers, e-books and documents people can download. This includes retirement readiness and retirement confidence assessments, which purport to help the reader decide if and when to retire. But each of these assessments are entirely focused on only the financial side of retirement.
Often the client’s decision to retire is determined by a number: the portfolio value desired or needed to retire, or a certain age or date at which they want to retire.
None of these numbers — portfolio size or age or date — are necessarily wrong. But using numbers-only conditions for this decision is incomplete.
It is incomplete because it fails to factor in the “other side” of retirement — the non-financial side. This side of the retirement equation looks at the mental, emotional, physical, social and spiritual aspects of life in retirement. If we can help clients first create a vision of what they want retirement to look like, the money and portfolio strategies can then be designed to make the client’s vision come to life.
These non-financial aspects are often more difficult to wrap their arms around.
Retirement takes money, no doubt. But living a happy, successful and meaningful life in retirement also takes a well-designed vision of what we want to do and who we want to be — assuming you make a change from your full-time career at some point.
Which brings us to helping clients connect their money with how they want to live in retirement.
What Do Clients Want?
Several recent research studies have highlighted the changing planning needs and wants of people as they approach and transition into their retirement years. I wanted to highlight just a few of the points and conclusions from this research as they relate to retirement.
Connecting the points from these studies creates a clear message that the advice clients want and need must include much more than conversations about their money.
These conversations, particularly around the time of retirement, must also include discussions about what a client wants life in retirement to look like. The money decisions then support what the client wants to accomplish in retirement.
How much a client needs when, and for how long, is determined by first creating a vision of their ideal life in retirement.
Retirement Study Conclusions
The Four Pillars of Retirement: What a Difference a Year Makes, the updated 2021 study from AgeWave and Edward Jones, concluded the following:
“The vast majority of retirees say that in addition to saving for retirement, it is important to think about what they will do to stay healthy, where they should live, how they will maintain or improve family relationships, and the activities that will give them a sense of purpose.”
The updated study also noted that “77% of those planning to retire wish ‘there were more resources available to help them plan for an ideal retirement beyond just their finances.’”
But most pre-retirees are not thinking comprehensively about these non-financial dimensions of retirement. There is a disconnect between what retirees say is important and what pre-retirees have thought a great deal about.
In addition, 54% of retirees wish they had done better planning for the non-financial aspects of retirement, only slightly behind the 61% who said they wish they had done a better job planning for the financial aspects of retirement.
The Future of Client-Advisor Relationships from AIG Life & Retirement and AgeLab noted that, according to research, there are opportunities to deepen client relationships by expanding their conversations into new areas that are of current interest to clients and highly relevant to their long-term financial well-being, such as health, security, family and lifestyle.
“People are living longer, working longer and looking at retirements that may span 30 to 40 years or more. This gives the financial professionals a unique opportunity to recast their client relationships by broadening and deepening the conversations they have about the future,” the report says.
They can further enhance their value proposition by adopting a strategy called “longevity planning,” it continues. This holistic approach to planning not only takes into account financial topics, but also considers non-financial matters such as encore careers, later-life entrepreneurship, health, housing, home modification, eldercare, family care and transportation.
The study “More Frightening Than Death: Fear and Loathing In Retirement” from Zety found that:
- “40% of respondents who feared retirement agreed that it scared them more than death itself.”
- “47% of respondents feared retirement more than poor health.”
But the fear of slowing down in retirement is a big concern too. “71% reported they were worried about being less mentally active in retirement, and 64% about being less physically active.”
Think about each of these responses from clients in each of these surveys for a moment. Taken collectively, what are they telling us?
The time is now to help clients prepare for life in this new retirement. Helping clients understand and plan for the non-financial side of retirement will improve their responses to these questions, and ultimately, set clients up for a more successful and happy retirement.
Let’s help clients create their ideal life in retirement.
Reid Stone, MBA, CPRC is the Founder and CEO of My Life’s Encore (MLE), which helps advisors’ clients prepare and plan for the non-financial side of retirement — or as he refers to it, “The Other Side of Retirement.” He is the author of the white paper The Strategic Value of Helping Clients Plan Their Ideal Lifestyle In Retirement: Planning the NON-Financial Aspects of Retirement In An Age of Longevity and the co-author of the book “The Retirement Challenges: A Non-Financial Guide From Top Retirement Experts.” Reid is a member of the Retirement Coaches Association (RCA).