Drug overdoses, suicides, alcohol-related illness and obesity have taken their toll on U.S. life expectancy. Americans in 2018 could expect to live to 78.7, down from 78.9 three years earlier,
The United States is the only developed country experiencing this decline, and our stressful lifestyles, poor coping skills and unhappiness are contributing heavily to these early fatalities.
There is so much emotional pain in this country and our clients are not immune. Given this glut of misery, why do financial planners focus so heavily on planning for a retirement that may never happen — when many of our clients are not happy in their present lives?
How many times have you had potential clients come to you with dreams of high returns or picking the next Tesla or Amazon stock to obtain quick financial freedom so they can escape the drudgery of their work life? They hope that, by some miracle, we will tell them they have plenty of money to quit. It is painful to pop those bubbles.
Some people are in vicious cycles of spending to obtain the happiness they lack internally. They squander money on the next great thing that may bring them joy, waste more money on the upkeep, discover that purchase didn’t increase their happiness at all, and then blow more on the next object of their desire. They support the merry-go-round by being chained to higher earning jobs they don’t enjoy or they go bust.
Most people with these personalities don’t become clients of our firm. We are truth-tellers, and if a person is not ready to hear the truth, they will not be happy.
The initial conversation with prospective clients focuses on their goals. What are their current and future aspirations? What do they hope to achieve from our relationship? Almost everyone has the dream of retirement as a current or future goal and they want us to help them plan for it.
This is where we pivot.
Before helping someone plan for the day they no longer work for a living, we need to understand why and when they want to achieve that goal. Do they hate their job or are they getting burned out from a job they previously enjoyed? Do they have time to provide balance for their family, take care of their health and tick off their “must do before I die” list? Or do they plan for retirement because that is the normal expectation in society?
When do they want to quit working? If a client wants to quit between ages 50 to 60, why so early? For many, it is likely because they are sick of working. But the underlying motivation may be worry about early death due to poor health or short family life spans.
Most importantly, is the client happy now?
In my roles as physician, financial planner and family member, I’ve seen plenty of people die too early from unexpected reasons. I’m grateful to have learned that life is precarious, and if we are not enjoying the present, we will have many regrets when death is staring us in the face.
This changed my approach to planning and I shifted my conversations about retirement.
Given this glut of misery, why do financial planners focus so heavily on planning for a retirement that may never happen — when many of our clients are not happy in their present lives?
The focus of our planning now entails addressing current life satisfaction and creating resilience for an unpredictable future. Because society is so homed in on “retirement,” getting the client on board with this change in thinking requires planting seeds and not delivering slaps to the face.
Spend more?
We analyze a client’s current spending and help them evaluate whether that spending is congruent with their values and goals. If not, we help them make adjustments. It is not unusual for us to encourage clients to spend more money to increase the experiences that will bring them joy.
Cash flow analysis is an ongoing process — yearly reports demonstrate how money is being spent. By being so diligent with the cash flow planning, we can better manage taxes and investments. Tax planning focuses on saving tax money in the present balanced with the ability to keep the client tax efficient in the future.
Estate plans and insurance are also reviewed yearly. When disaster strikes, clients appreciate us stepping in and helping them navigate the predicament. With the right documents and insurance in place, the situation is much easier to contain and stress is reduced for everyone involved.
Do we do retirement projections? Yes, but with many caveats.
First, we focus on current work enjoyment and, if a client doesn’t love their present work status, a discussion about career transition. Then we address work-life transitions — opportunities to gradually reduce work and fill that space with other meaningful pursuits. A sense of purpose keeps us healthier, happier and increases our meaningful life expectancy. For example, we introduce retiring physicians to volunteer clinics in our area. Helping the client create a fun plan for their life is a rewarding part of our job.
For those who insist on quitting at a relatively young age, depending on their financial situation, we aggressively counsel them to own a conservative portfolio, keep tight track of spending and maintain skills for some type of employment. Many decide to go back to work after decompressing for a couple of years.
Advisors should focus on key questions to best estimate how much retirement savings a client really needs.
Clients are also provided a projection showing a 4% return, which mentally prepares them for potential spending changes in a prolonged, low-return environment.
Projections are a tool for discussion, not a tool to produce certainty and complacency. By focusing the conversation on planning for resilience and life transitions instead of “quitting,” we can help our clients live a more meaningful life today. If and when retirement arrives, they will have enjoyed the journey along the way.
