With longer life spans, the financial fact of life is that many boomers will still need to generate some earned income in retirement. They might not retire from work—even once they qualify for age-dependent benefits, such as Social Security and Medicare—but rather will retire to a different kind of work.
In fact, the majority of Americans can’t afford to retire. Only two-thirds of Americans have saved anything toward retirement, according to the most recent Retirement Confidence Survey from the Employee Benefit Research Institute. Unfortunately, 57% have saved less than $25,000, excluding ownership in their primary home and defined benefit plans. And, 28% say they have saved less than $1,000.
Granted, those numbers are skewed by millennials and Gen Xers who have little in savings, but even for those who are 55 or older and have been with their current employer for at least 10 years, Fidelity Investments has found the average retirement account balance is $255,000. Even with 10 more years of work and saving, can that last 15, 20, or 25 years? Or longer?
It’s part of your evolving role as a financial advisor to make sure your clients have a realistic idea about retirement. Don’t let your clients think they are on the path to building a big enough nest egg, only to have them sorely disappointed if they don’t hit a certain dollar balance by a certain age.
Instead, change the conversation. Ask: “What haven’t you done yet? What are you passionate about?” Say to clients: “This is your life. What do you want to do five years from now and five years after that?” This is how today’s advisors add value.
Advisors must shift the focus from questions like “How can I retire at 65 or 70?” or “Will $1 million be enough?” or “Can I live on a 4% per year drawdown?” to a conversation about what boomer clients want to do in retirement. After all, boomers are a generation of doers. Will they be satisfied with endless days of golf and grandchildren?
Help clients understand that this “new retirement” can take many forms—working longer and delaying retirement or dialing things back a bit in order to work part time or as a consultant. It might mean taking a job that offers less pay than a boomer’s peak salary but more time off to recharge or take dream vacations. It might mean leaving corporate America for a job in the nonprofit sector—where working on a passion project could generate just enough income in these more relaxed years to supplement other retirement income. If you ask clients what they are passionate about, often you will find ways they can earn some income around those areas in which they have the most energy.
This is a much less stress-inducing place for clients work towards. It’s not about getting to a certain age and collecting that gold watch. What many people truly want is to have more control over the work they do. For advisors, it’s about adding choices to your clients’ lives. It’s about you no longer telling clients they can’t afford retirement.
Retirement is when the greatest things can occur. It’s a time to do more; a time to give back. It’s not time to stop. Or to quote Irene Cara, 54, an American singer and actress and baby boomer, it’s a time to “Take your passion and make it happen.”
Wayne Badorf, CFP, CFS, is head of intermediary sales for Wells Fargo Asset Management and president of Wells Fargo Funds Distributor.