Setting the stage: Help clients script their retirement 'second act'

I thought it was going to be just another semiannual portfolio review. But after we examined the client's accounts, discussed her asset allocation and looked at the latest simulations and forecasts my team had prepared, she gently placed her hand on top of the stack of documents and looked me in the eye.

"Kimberly, I've survived breast cancer, a divorce and 30 years in a cutthroat profession," she said in a trembling voice. "But now that I'm a couple of years from retirement, I'm scared to death."

After a pause, she continued, "Because I have no idea what I want."

I've written previously about working with clients to craft a purpose portfolio — the list of priorities for what they want to accomplish and how that list can change over time depending on shifts in life circumstances. As advisors, we can get so focused on managing accounts, making trades, reallocating and rebalancing assets and generally assisting clients in keeping up with their financial progress that we forget our main job: managing our clients' lives, priorities and values.

Clients approaching retirement have a specific need in this area: understanding why they're retiring in the first place and what their "second act" will look like. It's a particularly acute need these days when for more and more individuals the traditional image of retirement — stepping away from the daily office routine and spending time in leisure pursuits or with family — may be less viable or appealing. 

According to the Federal Reserve Bank of St. Louis, labor force participation by men aged 55 and over rose dramatically from 1995 to 2019 (just before the pandemic), from about 30% to just over 40%. Older women also continued to work in greater numbers, with the percentage nearly doubling during that period, from 17% to 30%. For some, of course, continuing to work is a necessity created by lack of adequate retirement funding. 

READ MORE: 'Grammy Pry' shows how gig work for seniors is remaking American retirement

But for many of our clients who have planned, saved and invested through the years, continuing their career — or even changing to a completely new one after retiring from their original line of work — is less about financial necessity than it is about a need for meaning: a continued sense of relevance and contribution to purposes they care deeply about.

We also need to remember that there are many more options today. In addition to post-retirement careers, phased retirement and flexible work options can all be choices for our clients as the concept of the second act develops. The traditional boundaries that used to exist between work and retirement are breaking down, a process that seems likely to accelerate as millennials, many of whom have built careers in the "gig economy," continue to age.

Ask questions to help clients envision their retirement role

 It's important to remember helping your clients define their version of a successful, fulfilling second act means shifting your focus from the tools it takes to get there  — 401(k)s, asset allocation plans, tax strategies, etc. — to the thing you're trying to help them build. In other words, they first need to understand the "why," and then you can work with them on the "how." 

This means the questions you ask should be less focused on investing and more on values and priorities, tailored to the client's specific qualities, and reflect your relationship with them. They might include:

• How do you feel when you picture yourself in retirement? If you're worried or anxious, what is the source of those emotions? Or, what are you doing right now that makes you feel most content? Is that something you'd want to keep doing after you retire?

• Imagine yourself 20 or more years from now, looking back on your life. What's the one thing that you'd most like to be able to say about it? What's the most meaningful thing you'd like to have accomplished?

• If I were looking at your checkbook or your transaction history right now, would I be able to tell what is most important to you? If so, are those things still going to be important after you stop working?

• What is your favorite way to spend time right now? Do you think that will still be true when you retire?

• A lot of people think it's important to "give back." How do you feel about that? If there was a single cause, idea or group that you'd most like to support, what would it be? (Remember, giving back doesn't just mean money; it can also mean time, involvement and expertise.)

• Can you tell me a story about someone who really "got it right" when they retired? What made them successful? Or, can you remember someone who seemed less happy after the end of their active career? Why do you think they felt that way?

Let new goals take center stage

Of course, you can probably come up with your own list of questions that would be better targeted to your clients and the specific qualities of your relationship with them. The point is, they need your help to envision — in as much granular detail as possible — what they really want. 

It's easy to say, "I want X million dollars in my retirement accounts by the time I'm 65." What's harder, but more important, is to be able to say what that money is going to do for the person or people who are most important. 

These are the conversations we need to be having with our clients as they approach retirement. As they prepare to walk out on stage for their "second act," let's help them know their lines — by heart.