I recently had an interesting discussion with a friend of mine (we don’t do her financial planning). The conversation turned to money and I enquired about her financial planning. The response was surprising. She said that every time she interacted with “her guy” she came away despondent. It was clear from the meeting that she was never going to retire and that she just had to keep putting money she did not really have into the seemingly bottomless pit that was her retirement fund.
We chatted a bit about this and I pointed out to her that in fact, the truth is that retirement is an artificially introduced concept, formally adopted by the US in the great depression to force an ageing workforce into retirement to make place for the revolting youth, thereby effectively keeping them off the streets and restoring calm to society.
When it was first introduced, retirement age was set at 65. It very quickly became clear that people were dying before they retired (ave age of death was ±63) and so the retirement age was reduced to 62 (where it still is in the US and parts of Europe). The idea being that you stopped working at 62, spent the next year getting your affairs in order and then checked out at 63. Retirement was never meant to be a prolonged period of time.
These days people may live for 30 or more years beyond their official retirement age of somewhere between 62 and 65 and the reality is that very few will be able to fund this long, unproductive period of time. The reasons for this are that it is almost impossible to fund 30 years’ worth of income need from ±40 years of contributions. We start too late, we contribute too little, we don’t preserve when we change jobs, we take too little investment risk and we pay fees that are often too high. So financially, the odds are against us. (No wonder the story that 1 in 10 people will retire financially independent is so frequently quoted.)
Truth is though, when it comes to “retirement”, money is the easy part. There is actually a much bigger and less spoken about side and that is the “what are you going to do with the rest of your life?” question. What reason will you have to get out of bed each day? What are you going to do when “one day becomes day one”?
Research shows that people who stop working too soon and who no longer have a purpose or a reason to get out of bed, tend to be miserable; their health deteriorates, their relationships take strain, they tend to moan about a lot of things (we all know someone like that) and they die sooner anyway (especially men)!
Back to the need for different conversations…the reality is that most of us will never retire. We may stop working in formal employment because we are forced out by the rules of an archaic retirement fund, but we will never stop working. We cant afford to (financially or emotionally). I think that one of the great roles that financial planners have is to spend time with their clients exploring how they are going to spend the rest of their lives once they stop formal work/employment.
We need to help our clients figure out what it is that they love doing and then help them do that with the rest of their lives. There are no products when it comes to this and there is nothing to sell to justify the time and energy spent but it really is time that we had some different conversations with our clients. I guess it’s hard to do this when your income is a function of selling a product.