Non-financial retirement considerations loom large

Let’s play a little word association. If I say “retirement,” what’s the first word that comes to mind?

Is it “savings”? If you’re like most people it probably is, and with good reason. There’s more to think about when it comes to planning for retirement than how much you’ve got saved, however. It’s something Jeff Supple, vice president–trust officer for State Bank of Cross Plains, tries to impress upon his clients.

As part of his work, Supple conducts an informal post-retirement interview with clients to find out what surprises them about retirement and what they like the most or miss the most.

For example, one long-time client reported that she used to hate the sound of the ticking clock at the beginning of 60 Minutes every Sunday night because it symbolized the end of the weekend and the start to another workweek. However, in retirement she said she’s fallen in love with 60 Minutes again. Sometimes, it’s the simple things that matter most.

But first, back to retirement savings.

With all the news in recent years about millennials overtaking baby boomers in population, it’s easy to forget that for a long time boomers were the largest generation. Their retirement numbers prove that out.

According to Pew Research and the Social Security Administration, about 10,000 men and women from the baby boom generation are retiring every day. That’s not a typo.

Many of those boomers are also ill prepared for retirement. Americans have a total of $24 trillion set aside in retirement assets, according to the Investment Company Institute. Unfortunately, that’s still not enough, in large part because Americans are living longer.

In 1900, the average life span was 47, notes the AARP. But a 65-year-old today can expect to live nearly two more decades. That presents a stark problem because according to a report by the Economic Policy Institute (EPI), the average household aged 56–61 has amassed just $163,577 in retirement savings.

While that number might seem encouraging, it’s not. Over the course of a 20-year retirement, $163,577 amounts to just $8,178 a year, or $681 a month, of income, explains the financial website The Motley Fool. Additionally, $163,577 represents the average savings among baby boomers nearing retirement; the median savings for that age group is just $17,000, which means a large number of workers have far less than the average. Also according to EPI, an estimated 41% of households aged 55–64 have no retirement savings at all.

Supple, who’s been working in State Bank of Cross Plains’ wealth management department for the last 16 years and in the financial industry for 22 years, says the financial considerations as workers approach retirement haven’t necessarily changed over the past few decades; however, the priorities have definitely shifted.

“The fear of running out of money (i.e., longevity) and health care costs have overshadowed legacy planning,” Supple explains. “Contingency planning for income sources that were previously sacrosanct, such as Social Security and pensions, is something that was rarely done 20 years ago, but is commonplace now.”

As such, where workers once looked forward to retiring once they hit age 65, if not before, many people are now planning to work well past that age. Part of that is to help stretch out what they have saved for retirement and make ends meet, and part is because boomers, in particular, find it fulfilling to stay active.

“The traditional notion of retirement is not dead, but it is dying,” Supple notes. “A lot of this has to do with demographic shifts, but there are also other factors at play. As the baby boomer generation ages, they’ve witnessed their parents go through retirement. People have been much more cognizant of how staying active and engaged is vital to your overall health, especially cognitive health. When you factor in the increasing amount of self-worth people receive from their jobs, you’re seeing more and more people working in retirement age — not out of necessity, but by choice.”

For example, Supple recalls putting together a plan for a gentleman in his late 50s a few years back. He was very insistent that the word “retirement” not show up anywhere, notes Supple. “To him, retirement meant ‘not relevant, not engaged, not active’ rather than a reward he earned. There has been a shift in perspective.”

Supple believes the younger generations are best poised to adapt to the new retirement ecosystem.

“Members of the younger generations don’t believe Social Security is going to be around for them and aren’t expecting a magic windfall to appear when they hit retirement age,” says Supple. “They are better educated on the value of a company’s 401(k) match and Roth IRAs. Baby boomers got caught in the squeeze of the era of the dying pension. The switch from traditional pensions to 401(k) plans, which shifted the retirement funding burden mostly to the employee, happened mid-career for a lot of boomers, which is why you see some dismal average savings levels for older employees. However, the ongoing concern and obstacles for the younger generations is the escalating amount of student debt.”

(Continued)

Non-financial fulfillment

Ultimately, planning for retirement should look beyond the financial aspects to include how retirees are going to spend their time actually living out their golden years.

Asking someone what work gives them other than a paycheck is often useful when getting people to think beyond the dollars and cents of retirement, explains Supple. For some, work gives them needed structure in their life. Days can blend together, and for some people, retirement can be less fulfilling if they don’t have a purpose.

“Setting up a coffee group every Wednesday morning might seem like a small thing, but having a reason for getting up in the morning and having something to look forward to can go a long way,” says Supple. “It’s often why you see so many older adults start volunteering for the first time in retirement.

“Along those lines, the question ‘What is your retirement job, and do you get paid for it?’ is a way to get people to figure out how they’re going to fill their days. A gentleman retired a few years back at 55. He mentioned he had nobody to ‘play’ with because his friends were all still working. He had no Plan B, and hence, didn’t enjoy his early retirement as much as he thought he would.”

Supple notes his job is as much about helping people shape their view of retirement as it is about saving up for retirement. It’s important to help people recognize the hidden joys. “A good financial planner should also be good at preparing you to flourish in retirement. Often, we get caught up in the minutia of budgets, asset allocation, Social Security, etc., and forget to step back and find out what is really important to people. That’s what led to the 60 Minutes story. She just wanted the freedom of fewer constraints on her time.

“She is not alone,” Supple continues. “Another client who recently retired from years of customer service jobs reported that she enjoys the quiet of retirement — she enjoys not having to talk to people on demand. The simple post-retirement ability to not have to be ‘on’ all the time was enough for her.

“I encourage people to have a discussion with their spouse or friends about what they envision as their own personal joys during retirement. Like my client who had nobody to ‘play’ with during early retirement, it’s critical to be on the same page with the people you want to spend your time with during those years. Travel is often only fun when you have someone to enjoy it with you. That piece hasn’t changed from generation to generation.”

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