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Don’t be fooled by the early stages - longevity has implications.
I’m often challenged by advisors and industry executives, “We don’t hear a lot of complaints from retirees. So why do you say most retirements will be a trainwreck??”
It would be in very poor taste to observe there were very few complaints from the passengers of the Titanic – during the first four days of their voyage.
“Retirement” is a terribly misleading concept. To many people, it is a destination – a long awaited moment to cast off a job they don’t love, a boss they despise or customers that are too demanding. Now it’s their time – time to travel, time to relax, time for hobbies, family or just do nothing. The most popular phrase I hear is “freedom”. And well deserved at that.
But the cruise ship of retirement faces icebergs. And those icebergs are typically life events created by longevity. The longer you live, the more you cruise the SS Retirement, the more chances you have to hit an iceberg.
Never Say “Unsinkable”
The Titanic’s Captain Edward Smith infamously ignored warnings by other ship captains on his course and was on record for years before the tragedy extolling the virtues of modern shipbuilding to the point where he “could not imagine any condition which would cause a ship to founder”. Sounds like a devotee of Monte Carlo simulations who doesn’t acknowledge the statistical reality that 70% likelihood is not a guarantee of success.
But what if the Titanic’s passengers had been told there was only a 35% chance of success – albeit with a short sidetrip in a lifeboat. Would John Jacob Astor IV, a billionaire in today’s dollars, have bought that ticket for himself – and his pregnant wife? She survived – the child was born – he drowned at 47 along with 65% of the passengers and crew.
Mind the Trimesters – Go-Go, Slow-Go, No-Go
Way back when I was an advisor to families, I met a couple who had already quit their jobs. At 61 and 60, Dick and Ginny were active true go-go retirees. They had his pension and were financially secure. From me, their first ever advisor, they were looking more for validation of their choices. Most of my perspective about retirement was learned watching my older relatives – four grandparents and three great-grandparents ( see more: https://nextchapterinnovation.com/my-family-made-me-do-it/ ).
“Tell me about your plans”, I asked. They enthusiastically described winters of skiing and summers of sailing their boat along the coast of Nova Scotia. “Wow – that sounds great”, I agreed, “So what’s next – when one of you may not be up for that effort?”. I went on to share how it’s very common to have great plans but that Mother Nature has her own and longevity can be a spoiler. There are strategies and location choices that can help ease the transitions.
The look on their faces said it all – I’d overstepped their expectation for the meeting. And just that quickly, they thanked me. And left my office. And that was my first encounter with the downside of being candid about retirement planning.
A few weeks later they called and asked for another meeting. “We’ve made some decisions”, they shared. “First, we really appreciate what you said – we weren’t ready to hear it”. They went on to say they listened and had taken steps. They scrapped the Nova Scotia plan in favor of Lake Champlain in Vermont where they could store their boat year round and also buy a condo in the same town as their “most responsible” child, who welcomed the idea. They also wanted to supplement the pension with a more protected form of income and liked the idea of an annuity in lieu of some of their mutual funds. Like a paycheck, they reasoned.
Reality Check, Paycheck and Checking Out
All good – but there was more. The “slow go” phase of retirement was daunting to them, but they really disliked the “no go” vision. “We have a plan for that” Dick shared with some flair, “We have some little white pills so we can go together.” Really?
Rolling the story forward, Dick and Ginny campaigned successfully for what became only the second assisted suicide bill in the nation. The governor of Vermont signed the bill on his father’s birthday with Dick standing over his shoulder. Death with Dignity Vermont was born of their dedication to doing things their way in retirement and reflected the determination and energy that defined them both. I was so proud to see them on the front page of the New York Times.
Reconnecting with Ginny upon Dick’s death nearly thirty years after our first meeting, she recalled that day – though the cyanide disclosure was not discussed. She did say how much they appreciated the “reality check and the paycheck” – and she volunteered, “We still have that annuity – it’s been great”.
Real Retirement Planning Takes Courage
The facts are stubborn – most of our clients are not prepared. Nearly half of people with more than $100k in a retirement plan have no advisor, no financial plan and – we know – not enough money to retire and maintain their lifestyle.
You can say, “Not my clients”, but are they ready to finance 30-40 years of additional longevity? How do you know? How do they know? Most people still underestimate their longevity so what plans do you have for them to hedge that risk?
What about those trimesters of retirement? Have you had the conversation with every client close to retirement age or already in retirement about the second and third trimesters? What does “slow go” imply for their plan – including where they will live? And what about “no go” when one partner or spouse is gone. My mom’s in that phase now with very different circumstances from the other two trimesters.
You Can’t Fake Retirement Planning
The advisors who sell a sunny retirement funded by a balanced investment portfolio fit only with multimillionaire clients who can keep their spending in check. And that is a tiny percentage of the population. For all of the other clients and advisors, there is real work to be done with trade-offs and pivots as the inevitable challenges of longevity pop up. Professional imposters won’t last and naïve clients will fail. The real advisors will protect their clients – and earn both unprecedented growth and the feeling of achievement. Do good and feel good.
Related: The Retirement Opportunity Is Staring Us in the Face - Can You See It?