My work with consumers, clients and advisors over many years has revealed to me three groups of retirees – 1) those that are “all set”, 2) those that are screwed, 3) those that are screwed but don’t know they are screwed. I’m equally sure the size of those three groups runs from very small to very large. So that’s become my mission – to help reverse the trend of unpreparedness. And the lead edge of that mission is Next Chapter.
The human brain is not naturally wired to long-term planning. That’s scientific fact. Most people suffer from what Nobel laureate Daniel Kahneman calls “narrow framing”, which is the tendency to minimize the size and scope of situations and therefore fail to see their full implications. We see the tree. We miss the forest.
But even when we plan, retirement planning relies on predictions, many of which are spitball guesses for most people. Have enough money for retirement? How do you know unless you either have a fortune (most people don’t) or you have an accurate read on your full assets and benefits (after taxes, please), the future prices of those assets, the rate of inflation, your health in retirement – and the expected date of your death. Wait, we also need to know if you will be responsible for anyone else in that retirement. And for how long. And how much it will cost.
Because most people won’t guess accurately when answering these questions, we need to adjust the view of our roles and consider ourselves “retirement recovery specialists”. The first step is tot end the stigma of being unprepared and just assume everyone is. Even the multi millionaires may get trapped in a lifestyle they can’t afford or face life changing healthcare crises. Just as likely for the wealthy is the need to find meaning, a new chapter, or risk boredom and loneliness. Retirement is not just financial, it is emotional.
If we are going to be good at this retirement recovery role, we need to be prepared like ninjas for the common planning potholes.
Advisors very often are confronted with “moments that matter.” By these, I mean critical situations clients or their families are in when they need critical help. The common thread, expressed by advisor and Next Chapter Advisory Council member, Tom West, is that these moments reflect situations “in transition” – the train is already leaving the station. Families are reacting and contacting advisors. So advisors are too often trying to catch up before having the chance to address the problem.
An Unexpected Family Health Event
I remember vividly the story of Sue, whose husband missed only one day in 33 years at John Deere. Roy collapsed at a pro-am golf tournament and was diagnosed with a brain tumor. He had never worked closely with a financial advisor and now Sue needed help. Their advisor, Alicia, met with Sue and five of her friends who all had similar situations. Alicia acquired them all as clients. But the starting point was the establishment of trusted contact information, POAs and medical proxies. None of the five families had those basic documents in place.
Client is Having Trouble Making Financial Decisions
An advisor named Christian had a longtime client who always drove herself to his office. But one day she admitted to him she could not remember where she had parked. And it was not the first time. Christian assured her she was safe, and he contacted her son who lived nearby. Additional measures Christian recommended included a fraud monitoring service; an updated power of attorney; and the update of other documents, including the living will. Christian now works closely with both sons.
Recently Widowed Client with Adult Children
Jackie’s husband Bill was an engineer and also a very confident investor. He built computers and did the taxes. He brushed off efforts by his “direct” financial services firm to discuss managed accounts and income products. His assigned advisor wrote off Bill as a poor prospect for planning. But after Bill died, Jackie engaged fully with the advisor at the suggestion of her oldest daughter. Seeking to save her children the stress of watching over her finances, Jackie opted for both a professionally managed account and protected income solutions – a complete turnabout from Bill’s approach.
“Gray” Divorce Creating Financial Insecurity
Divorce rates are rising again across the board (thank you, Covid-19) but older people are divorcing at higher rates. Whether it’s gray divorce or splits among younger people, it can put a severe strain on anybody’s retirement savings, and when you or your team members are asked to help in these situations, you must be ready to demonstrate empathy and perform solid analysis. It doesn’t matter how wealthy the families are. Divorce at any level of wealth invokes intense emotions and intergenerational conflicts.
Retirees Worried About Paying for Healthcare
Health is the No. 1 priority of clients across all adult age groups—health, wellness and the financing of healthcare. They have to ask themselves if their documents are in order and who will be the medical proxies making their decisions. How will they arrange financing for their health—with Medicare or long-term care? How will they be able to customize cost estimates using local rates, their family health history and longevity projections? Advisors often turn to national surveys to answer those questions, even though these things often require local answers. We can do better.
Older Adults Who Want to Age in Place
My mother is an 88-year-old widow with limited mobility but a sharp brain. She resists assisted living because she believes she’ll lose independence. She’s managing fine but knows her situation could change. We all hope that she can age in place with in-home care. But as the pandemic showed, we can’t assume that caregivers will always be available. In fact, qualified, reliable and trustworthy caregivers will likely be scarcer than top financial advisors.
All of these vignettes illustrate the value of proactive discussions, early on, with older adults and their families about aging “transitions”. The talks should come well in advance of the proximate need. Says Tom West, “These life moments are like dominoes – if one falls, the others tend to follow”. Of course, this work is no game – and there may be no more valuable “moments” for financial advisors to prove their value.
As a start, you can tell clients these stories and query of each what their preferences and game plan will be. Let the games begin.