The new retirementality

By Mitch Anthony, CPA

"How dull it is to pause, to make an end, to rust unburnished, not to shine in use! As though to breathe were life."
— Alfred, Lord Tennyson

On a recent plane ride, a businessman in his late 70s told me the following:

"Let me tell you why I don't buy into the American dream of leisure-class retirement living. Every year I go to Florida to visit my affluent peers who have been long retired. Here's the drill they go through every day. They get together and have breakfast and converse through the morning. About 11 o'clock or so they start checking their watches because at 11:30 they can have their first cocktail. After a couple of drinks it's on to lunch. After lunch it's on to someone's boat and more cocktails. Then home for a nap, a new round of cocktails and dinner. When I bring up the subject of productive work, they all talk about how great it is to not have to go to work anymore.

"On my way home I sat and thought to myself how grateful I am to have meaningful work at this stage of my life. I am so happy that my phone is still ringing."

Whose vision of retirement is most indicative of the future of retirement thinking? The affluent leisure class or the businessman whose phone is still ringing in his late 70s?

My guess is the vision of retirement in which the phone is ringing will replace the vision of a 20-year cocktail party. In this article, I want to discuss the evolution of retirement and why it will never return to its former state:

The institution of retirement was an industrial-age invention whose time, for the majority, is running out.
The myths that perpetuate traditional retirement in our society are quickly eroding.
Financial professionals need to abandon old assumptions and afford every client the opportunity to define the retirement lifestyle they desire.

A brief history of retirement

Retirement, as we understand it today, did not exist in pre-industrial America. In those days, older members of society weren't sent to the sidelines. They actually held a more prominent place as a resource for their insight, knowledge of skills and crafts, and lessons gained from experience.

It was the industrialization era that created the conditions that gave us retirement. Industrialization ushered in a profound redefinition of work. Mass production became the popular mode of work, and workers began to be viewed as parts in the system, subject to wear and replaceable.

The industrial age first redefined "work," then it redefined the span. Workers doing work they did not particularly enjoy were quick to buy into the idea of retirement.

The watershed moment came in 1933, in the deepest, darkest depths of the Great Depression. Social conditions had reached an explosive point because of the unemployment of one-fourth of the labor force. Franklin D. Roosevelt and the New Dealers were in a precarious and potentially disastrous situation, with masses of angry young men demonstrating in the streets. Roosevelt had already seen where these situations could lead by the examples set in Germany and Italy. The New Dealers' plan to get young people working again was to offer a public pension so the older men would retire.

One of the major issues Roosevelt had to settle was the age at which one could receive Social Security. The only precedent that existed at the time was developed in the German Republic in 1875 by Chancellor Otto Von Bismarck, who had originally pegged the age of 70, citing a biblical reference to "threescore and 10 years." Bismarck's original retirement marker was set, allowing the workers just enough time to pick out a gravestone if they should be lucky enough to live that long. Bismarck lowered the age to 65 a few years later because very few people lived to 70 to collect the benefits. And what was the average life expectancy at that time? All of 46 years!

The retirement plan designed by Bismarck obviously had not been intended to give a worker any time for enjoyment — not with a life expectancy of 46 and a retirement age of 65.

It helps to move to our modern age to understand Bismarck's original intent. The age of retirement was 19 years beyond the average life expectancy. In those days a person who was 65 was indeed old — much older than today's 65-year-old. Based on the original standard developed in the German Empire, with a modern life expectancy of 85 years, the retirement age today would be set at 104!

When FDR and the New Dealers, seemingly following Bismarck's example of 50 years before, settled on the age of 65 in 1935, the average life expectancy in America was 63 years. Using that measure as a modern standard would place our retirement marker at 86 years of age.

The obvious conclusion one could make is that retirement was never intended to remove people with strong productivity potential out of the workplace. Our view is skewed on this issue, however, as a result of the difference in the constitution of a 65-year-old today and that of a 65-year-old in 1935. Because the retirement markers were set later than the average life expectancy, most people didn't live long enough to collect Social Security benefits. FDR eventually moved to have the age of retirement set to age 62.

Retirement was designed to be a bridge from the loading dock to the grave. It was invented in an age in which physical labor was the norm and when a 62-year-old felt "old" because of the physical strain. Today we primarily trade "intellectual capital" and we may well be in our prime at age 62. Yet the traditional model is still touted in our society as if nothing has changed.

Closer inspection of the thinking that undergirds the perpetuation of traditional retirement reveals what a cultural anachronism this idea really is and exposes naked the myths that support traditional retirement thinking. These myths are quickly eroding.

Here are the myths that have ruled the concept of retirement up to the present:

Age 65 is old.
Being retired means you're not working.
You have to be 62 to do what you really want to do.
Retirement is exclusively an economic event.
A life of ease is the ultimate retirement goal.
And a more recent myth: "I can do this (retirement planning) by myself."

Sixty-five is old

"How old would you be if you didn't know how old you were?"
— Satchell Paige

Old ain't what it used to be. When the age for retirement was set, most people didn't even live until retirement age. Now we live 20 to 30 years past the retirement age.

The age of 65 in this day and age has little resemblance to the age of 65 in, say, 1970. Most people are not old at 65 today. They may or may not have slowed down. Thirty years ago you didn't see many men in their 70s jumping out of airplanes or flying in outer space as our generation has seen with people like George Bush and John Glenn. The behavior of these men may well serve as portents of the active lifestyles in seniors of the future.

How old will you be when you really become old? It seems that the answer to that question is as individual as the person answering it. We know that the marker for old is no longer 65. Some recent surveys show that most seniors now feel that the marker for old is somewhere between 75 and 80.

Retirement means not working

The retirement of the future will no longer be a "cold turkey" abstinence from labor. The retirement of the future will be defined by one person — you! You will decide how much you want to work, where you want to work and when you want to work.

The growing trends in workplace flexibility motivated by a tight labor market spell only freedom for you and your future. People will design a retirement they can live with. This will mean working part-time for some and entering and exiting the job market as they wish for others. The two extremes of the old retirement model — all work or no work — is simply a relic of the past. We need to explore the manifold possibilities for work at any age.

You have to be 62 to do what you want to do

Millions of people are sacrificing the present in hopes of following their heart at 62, or whatever other age they retire.

Many people who want to pursue a passion or a new focus see this as their only hope. Many desire freedom in their lives from the drudgery of draining and stressful toils and long to move to the avocational pursuits they had previously entertained only in their daydreams. We need approaches that help clients integrate their assets and their income with their passions and life.

Is life about making money or is money about making a life? A pervasive theme in our society is that we should always choose the path with the biggest bucks. Consequently, many people put their souls' work on the back burner while they travel a career path with the most money. Why? So they can someday have enough money to do what they really wanted to do in the first place.

This flawed philosophy of putting first things second in our career and life is the reason why so many today are so motivated to retire — that is, so they can do what they want. They have chosen to use their lives to make money rather than to use their money to make a life.

By using the innovative approaches of financial life planning, you can help clients make the transition into what they want with their lives. All your clients have to decide is what they want to be when they grow up.

Retirement is an economic event

This implication has been the biggest mistake of the retirement savings industry. The idea that retirement is simply an economic cliff for which we must have a parachute ready at age 62 has been the primary motivational message the industry has offered for the last 40 years.

The problem is that many people are preparing a golden nest egg that will be placed in a dying tree. The nest egg is their retirement savings and the dying tree is their retirement life.

Retirement is a life event, not an economic event. We must stop treating retirement as an exclusive economic event. We need to develop a more holistic approach that integrates an individual's aspirations, life stage, familial responsibilities, health issues and concerns about money. People want to explore the connection between their money, their soul and their lives as a whole.

There are many wise advisors in the retirement planning industry that have realized the importance of a financial life planning approach versus the monotonous money-crunching and myopic retirement planning.

In the wheel of life, money is but one spoke. It is not the wheel and it is not the hub. People today want to talk to advisors who recognize the need to look at their current stage of life and the stage of life they are approaching, and then explore the money issues that are relevant at these stages.

A life of ease is the ultimate retirement goal

A life of total ease is one step from a life of disease. The reason so many retirees are ill at ease is because without the contrast and paradox of meaningful labor, leisure loses its meaning. First you become bored and then you become boring. Fishing and golfing are great fun, but they make poor full-time occupations for a period of 25 years for most. There are far too many "grumpy old men" roaming the retirement landscape.

They are grumpy because they are bored. The new retirementality debunks the myth of fulfilling full-time leisure as pictured in the retirement brochures. Many of us find meaning and purpose in our work and a needed catharsis in our leisure. It's difficult to enjoy the one without the other. It is a necessary paradox in our lives. This is the reason that more than one-third of male retirees go back to some form of work within one year of retirement and more than two-thirds of them take full-time jobs. They would die if they didn't. There is a way to a balanced approach to retirement planning that can provide both fun and fulfillment.

I can do this by myself

The proliferation of the self-directed 401(k) and the advent of online trading have led many people to believe they don't need any help in planning their financial future. This is akin to saying, "Because I can buy my own vitamins and pills, I don't need a doctor." Are you buying the right vitamins and pills for your situation? When is the last time you had a checkup? Or would you rather not have one and believe you're not at risk?

When it comes to dealing with the health of our wealth, many people fall into easy denial. The self-care phenomenon in health care is a good thing as long as we do not begin believing we know all that we need to know. Just as there is a time and a place for a health expert, there is a time and a place in our lives for a wealth expert, advisor or money coach as well.

Illusions, delusions and hype

The time has come for financial professionals to feel the pulse of this generation and radically overhaul their retirement discussions with clients. A financial planner told me the following:

"If you were to ask me, 'Who are the most distraught clients you see?' I think my answer would surprise you. They are not the couples in their 50s who are discouraged to find out they will not be able to retire when they thought. They are not the clients whose portfolios have had less than spectacular returns and must extend their plans for early retirement. They are the retirees with the great portfolios who are bored out of their minds. These individuals feel like they have been removed from the mainstream of life, are watching from the sidelines, and are not allowed to get back in. As one guy put it, 'Retirement is a spectator sport. I don't want to sit here and watch the world go by. I liked being in the game!'"

This point became especially clear to me recently when a friend asked me if I had plans to retire early. I thought about it for a moment, and then it dawned on me: I like what I do! I write, I speak, I consult with companies and organizations on how to build more meaningful relationships. Why would I quit doing that? If I did quit, I think I would begin to self-destruct. There will always be something for me to do and I will always enjoy doing it. You don't make plans to retire from your passion in life.

The financial planner who is in touch with this changing idea about retirement can begin to take a new tact by initiating a discussion that is not based on rusted-out industrial age ideals. The most important facet in the retirement discussion today is what it will take to make each individual feel fulfilled and useful.

Roy Diliberto, CFP, tells the story of a client with whom he and his team were meeting. This gentleman was planning to sell his company to one of the people that worked for him and retire. However, Roy noticed that he seemed to be struggling with the whole proposition during the meeting. Everyone at the meeting, including lawyers, accountants, etc., wanted to focus on the numbers and the sale of the business, etc. Roy had the intuitive insight to realize this conversation needed to transcend to a different plane

Roy asked this client what it was he loved and hated about his work. The client glowed when he talked about the aspect of work that he loved. "Buying airplane wheels!" he beamed. He had spent a lifetime of expertise in buying, rebuilding and re-selling airplane wheels and parts at a wonderful profit. Nobody knew more about "buying airplane wheels" than this man. The negatives were the day-to-day operational details and tasks that had worn away his patience and energy level.

Roy brought a novel perspective to the discussion by asking, "Instead of selling the business to this employee, why don't you give him a $100,000 raise and let him manage the operational side of the business and you can continue to find wheels to buy on a part-time basis?" The client about came out of his chair with excitement. His whole countenance changed — he loved the idea!

One of the lawyers spoke up with a question about the agreement of sale (as if the preceding conversation had never happened or their dialogue was just a fantastical romp in Never-Never Land). The client, flushed red with frustration at the dismissiveness of the lawyer, shouted, "No! I want to do what he said," pointing to Roy.

The lawyer represents the mindset in this industry that cannot think outside of the traditional retirement box. But this client was clearly a man who would not be truly happy unless his phone was ringing. The conversation Roy started is what the new retirementality is all about for the financial advisor. Advisors are in a position that, by asking a few questions, can help clients rethink the retirement proposition and come to a solution that pays both materially and emotionally.

The new retirementality requires a shift both in how we plan our lives and how we manage our resources. The work we must do is part philosophical and part fiscal. Those who have emancipated their lives have done so with wise, prudent resource management and with an uncompromising intolerance of all-consuming, dead-end working careers — no matter how materially satisfying those careers might be.

These changes have been in the air for some time. People intuitively recognize and agree with these changes. I was moved by the frustration and resignation I saw in so many people regarding traditional retirement and I felt compelled to gather and articulate the ideas that constitute the new retirementality.

My hope is that readers will see the goal for what it is — freedom. I want to see people embrace the truths that will bring freedom to them, both materially and philosophically. I find it difficult to believe that any life was designed for the sole purpose of gathering wealth. Although personal wealth can lead to greater autonomy, true freedom lies in discovering purpose in all aspects of our lives.

I hope these ideas can play a role in helping you and your clients define the life you want ... at any age you choose.

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