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How a Fiduciary Can Better Prepare Pre-Retirees to Avoid that “What’s Missing” Feeling in Retirement

How a Fiduciary Can Better Prepare Pre-Retirees to Avoid that “What’s Missing” Feeling in Retirement
October 30
00:03 2018

We’ve seen how the role of the fiduciary is expanded for retiree clients (see “New Fiduciary Role: What Happens When the Retirement Honeymoon is Over?, October 9, 2018) and how retirees react once they find out retirement isn’t what it’s all cracked up to be (see “3 Ways Retirees Adjust Their Lives Once They Discover Their Pre-Retirement Assumptions are Mistaken,”, October 23, 2018). Both of these pieces deal with retirement after the fact. Is it possible for workers to avoid the surprises in retirement by accounting for them before they actually retire?

Stephen Heitzmann, CEO of Altruistic Investing LLC, based in Colorado Springs, Colorado, asks this very question. He says, “Thousands of Baby Boomers are retiring every day, and many are finding their experience to be worse than they imagined. People usually have this eye-opening moment within the first year of retirement. Could this be the result of the ‘grass is always greener’ phenomena, or is there something people can do to limit the possibility of this happening to them?”

Perhaps the usual focus on the fairy tale version of retirement has led to the problem of post-retirement disappointment. “Many dream of traveling the world or moving to a quiet plot of land in the nearest country club,” says Heitzmann. “Others might be drawn to a sandy beach. Unfortunately, statistics tell us that few end up realizing their dream.”

To counter this, pre-retirees are vowing to avoid the mistakes of their older brothers and sisters. “I’ve found that many people’s expectations of retirement are shifting years before they retire,” says Patrick King, founder of Transformative Financial in Atlanta, Georgia. “They’ve seen their friends and colleagues struggle to maintain connections and purpose after stepping away. There’s only so much golf you can play.”

A recent study reveals what people are doing before they retire to better prepare for their eventual retirement.

Jim Poolman, Executive Director at the Indexed Annuity Leadership Council (IALC) located in Bismarck, North Dakota, says, “While everyone’s idea of retirement is different, there are certain actions being taken by many working Americans to adjust to the new reality of retirement. Data from a recent IALC study show that:

  • More than 40 percent of pre-retirement workers have already adjusted their lifestyle choice/expenses.
  • Nearly 14 percent of pre-retirees are taking on multiple jobs to support their retirement savings goals.
  • Nearly 10 percent of workers have switched jobs for better retirement benefits.

Perceptions start to change as Americans evaluate their desired retirement lifestyle against their future expenses, overall retirement goals and how prepared they are by how much they’ve saved.”

Preparation can take the form of four straight-forward steps:

You’re Not Alone. Talk to Others:
Why reinvent the wheel if you don’t have to? There are plenty of people what have already retired. The first step to better preparing yourself is to talk to those people. Thomas Kavanagh, a Vice President at Lenox Wealth Advisors in New York City, says, “Talk to people who have retired recently. Talk with advisers who have known you over many years, who have helped others make that transition. Like most things in one’s financial life, talking, thinking and planning in advance will make that transition easier.”

Don’t just talk to friends or even strangers, talk to your family first. After all, whether they (or you) know it or not, you’re all taking this ride together. It makes sense to make sure everyone is at least going in the same direction. “If you’re are married, it is very important to talk about with your spouse’s expectations,” says Ryan Fisher, President of White Coat Wealth Management in Fort Wayne, Indiana. “What does your spouse envision retirement to be?  Is it traveling the world or spending more time with grandkids. Talking about expectations ahead of time can help stream line the idea retirement and get you both on the same page once the time comes.”

What’s the best thing about talking to other people? They’ll force you to remove those rose-colored spectacles you’re wearing. “The biggest challenge is to acknowledge what is coming,” says Kelley Palmer, Director, of Retirement Optimization at John Hancock Retirement Plan Services in Boston, Massachusetts. “Have real conversations with family and friends. Savvy employers are offering ‘retiree’ work options, alumni networks, and mentoring opportunities.”

Have a Plan:
Talking with current retirees should lead to an inventory of “gotcha’s” they experienced during the course of their retirement. Don’t let that get you down. Rather, use it as a springboard to avoid those same mistakes, or at the very least minimize the pain associated with them. “Suffering can be limited by those who learn from the experience and mistakes of others,” says Heitzmann. “Pre-retirees can formulate a plan to successfully navigate retirement by focusing on the three common buckets: finances, health and purpose, all sharing in equal importance.”

It goes without saying a finance plan is a useful tool heading into retirement. “The key to financial stability is adequate planning,” says Elizabeth Kelly, Senior Vice President of Operations at United Income in Washington, DC. “Retirement spending isn’t completely predictable, but it’s very possible to get in the ballpark. Retirees should have a detailed financial plan that accounts for spending fluctuations over the course of retirement, such as increased healthcare costs after age 80.”

There’s a temptation – among professionals as well as their client, to unduly emphasize the investment portion of their financial plan. “I believe that having a written plan is so much more important than the investment tools being used to achieve it,” says Jeffrey Beyer, President of Paladin Retirement Advisors, Newtown, Pennsylvania. “A solid financial plan digs into your expenses, your income sources, inflation assumptions, tax issues and then uses very conservative growth assumptions. If the market has a long period of stagnation will we still be ok. But the more retirees plan for all of the what if’s in retirement the more confident they will feel and the more that missing feeling goes away. But if they have a plan that insulates clients from market volatility, from rising interest rates, from inflation, from tax burdens, for living too long, or dying too soon then the missing feeling is usually completely diminished.”

But, as Heitzmann says, the plan can’t focus on finances alone. “One needs to do more than financial planning,” says Palmer. “Pre-retirees should take a holistic approach to their retirement planning and consider not only their finances, but also things like what will their social network be, will they be able to easily access the things that give them joy, and are they prepared for the inevitable health challenges old age brings.”

In the past few years, “Goal-Oriented Targeting” has becomes a popular planning device (see “How Does Goal-Oriented Targeting Work?, July 15, 2018). Using this method can extend into retirement. “To avoid the ‘what’s missing’ feeling, pre-retirees should first set defined and attainable goals for their lives,” says Paul Zachary Shelton, Jr., portfolio manager with Warwick Shore Advisors, a registered investment adviser located in Orlando, Florida. “These goals can be financial or non-financial and be designed to reach pre-retirement or post-retirement. Once these goals are established I recommend starting a conversation with a financial advisor to create a roadmap for success. I say ‘starting’ because a thorough financial plan and healthy adviser-client relationship should continually evolve as life happens.”

Have a Transitional Period:
Lowering the risk of surprise in retirement comes down to one word: “practice.” Don’t wait until you get that gold watch to get into the game of retirement. Play a few scrimmages first. “The best way to prepare for this for pre-retirees is take an extended time off from working (let’s say 3 weeks with no work related to their business),” says Fisher. “After being off for about a week or two, they will get some idea of what it means to have every day as a Saturday. I would also advise them to ask their friends that are retired, what they miss about being in the workforce. What they do to fill in the 40+ hours a week of free time they now have.”

While Fisher’s idea will test how fast you might get bored, you can also test how fast you might go broke. Jerry Lynch, President/Owner of JFL Total Wealth Management, LLC in Boonton New Jersey, says, “I suggest that before you retire (one year) you start living on your retirement budget to see if it actually works. You do need to manually adjust some things that you need to change in retirement such as medical costs, transportation costs, etc,… If you cannot realistically live on your retirement budget today (while working) and saving the rest, you probably can’t do it the following year when you retire.”

Many of today’s workers, for a variety of reasons, are abruptly retirement, they’re transitioning into retirement. “Experience Is the best teacher,’ says Kavanagh. “Consider ‘downshifting’ instead of going from 100 mph to zero. Use the newfound time to see how you enjoy filling it. If you plan on moving or becoming a snowbird, spend time in the area you plan to live several times over the course of the year.”

Transitioning into retirement offers many practical advantages. Lynch says, “I also think there is a tremendous benefit of fading out of work slowly for several reasons (maybe cutting back 1-2 days per week for 2½ – 3 years): 1) You are not leaving the workforce (if you leave and try to come back it is incredibly difficult to get a job, nobody feels that you want to really want to be there and that will be reflected in the job offers); 2) You have a chance to see if you budget is reasonable over a longer period of time; and, 3) the part time income means your assets continue to grow.”

Have a Purpose:
This is at once the easiest and hardest step in pre-retirement planning. After spending a lifetime where your purpose is “to go to work,” retirement suddenly pulls that rug of regularity out from under you. This can be a pretty jarring feeling once you’ve realized what’s happened. What can you do to better prepare yourself for several decades of not working?

“To be better prepared to face the problem of what’s missing, retirees should be intentional about carving out time for things that they think they will have more time for in retirement,” says Scot Landborg, Senior Wealth Advisor at Sterling Wealth Partners in Tustin, California. “They should start seriously thinking about hobbies, activities, charitable pursuits, consulting opportunities or anything else that they may be interested in that might be worthy of their time and attention. Anyone considering retirement in the near future should be realistic with their outlook of retirement. Succeeding in the retirement phase takes some action on the part of the retiree to find that fulfillment. The happiest retirees have something else motivating and exciting to do in retirement. Retirement is the start of a brand-new journey in life, so retirees should take an early start in the process of building the path to this adventure.

With the industry focus almost exclusively on financial planning, it’s important to accept the most important thing is “life” planning. “Pre-retirees need a plan that is more than just financial,” says Eric D. Brotman, President & Managing Principal for Brotman Financial Group, Inc. in Lutherville, Maryland. “What is the strategic plan for the next 5-10 years of your life? What are the ‘bucket list’ items? What passions need to be fulfilled to create a rejuvenating and enthralling chapter of life instead of a sad ‘last act?’ I believe that successful retirees have the same few things in common: 1) They are debt-free; 2) They have protected their health and continue to care for themselves, physically and otherwise; and, 3) They have a sense of purpose and are creating a legacy.”

How do you do this? Joseph Conroy of the Synergy Financial Group in Towson, Maryland, says, “The best way to prepare for what to do in retirement is by sitting down and taking inventory of your life. What types of activities do you like to do when you aren’t working? What are the things you would like to do that you never had time for while working? Who are the people you most enjoy spending time with? Start writing down your list of the things you like to do, the things you want to do and the people you want to be with. That will get the ball rolling on finding your new purpose in retirement. Everyone needs a little sense of direction to figure it out, but it has to be something that comes from within. People also shouldn’t put too much pressure on themselves, the interests and people can change. Whatever someone starts out doing in retirement can be totally different and change multiple times in retirement.”

Our sister site offers tools and techniques to help people discover and enjoy their personal lifetime dream (see Life isn’t about money, it’s about life. You first need to know your purpose and understand your core values and beliefs. With that knowledge, it becomes easier to paint the picture of your own lifetime dream.

You can find purpose in a hobby or a cause. Start sampling some before you retire. Kelly says, “Many retirees choose to volunteer regularly, take classes, care for grandkids, or travel extensively – all great ways to add structure to days when no longer tied down to a 9-to-5 job.”

King often speaks to retiree focused entirely on the “off” time of retirement. “But I do my best to get them thinking about their passions for the inevitable ‘what now?’ moment,” he says. “The conversation is often a twist on the ‘three hobbies’ adage: one to stay healthy, one to be creative and one to give back.”

Brotman is doing his best to spread the word on this. The objective of his upcoming book and podcast (both entitled Don’t Retire… Graduate!) is to reframe the retirement discussion. “Retirement is not the absence of work,” he says, “but rather the absence of needing to work (i.e. financial independence).”

Christopher Carosa is a keynote speaker, journalist, and the author of  401(k) Fiduciary SolutionsHey! What’s My Number? How to Improve the Odds You Will Retire in ComfortFrom Cradle to Retirement: The Child IRA, and several other books on innovative retirement solutions, practical business tips, and the history of the wonderful Western New York region. Follow him on TwitterFacebook, and LinkedIn.

Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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