It’s time to change the way we plan for retirement, since the way we look at life and retirement has changed.
Traditionally, folks worked hard, saved up for retirement, reached a magic age when they retired from their jobs and lived the rest of their life in leisure, finally on their terms. They put off living their ideal life until the last decades of their life. They sacrificed happiness now for happiness later.
My conversations with clients reveal that there is a desire for life to be more fulfilling now, and to live life on their terms now. There is also an interest in continuing to work far into the future, partially out of financial necessity, but largely because this generation of smart, accomplished women likes to work. They like the many benefits that come with continuing to be stimulated and relevant.
In fact, one study reports that 72% of boomer pre-retirees want to keep working after they retire. They want work to be more on their terms, allow for better quality of life, but continue to work. And there are anti-aging benefits to continue working as we age.
From a financial planning perspective, we find this super exciting. Working longer changes the planning assumptions for a client. It opens up many options for a client in their present life, and it may be part of the solution to financial security later in life. Honestly, this seems like an obvious solution, but something my industry has just missed because of our focus on traditional planning processes. We explored this idea a bit more and were excited to share our thoughts with you.
LIVE LIFE NOW AND WORK LONGER
When I sit down with a new client our discussion begins with what their ideal life would look like. If you could choose, how would you live? I am hearing more often that this life includes years of working hard, and then a point in time when they are willing to dial back the work intensity and work part time. The reason for this is twofold: First, they will probably need the money; but secondly, they want to continue working. They like what they do, but want to get to a point where work is truly on their terms.
WHAT DOES THIS MEAN FOR RETIREMENT PLANNING FOR EXECUTIVE WOMEN?
We see this as a real sea change in how we plan for retirement for executive women. Conversation with these high achieving women often reveals a lack of balance in life, in addition to many other frustrations. There is a sense that down the road, once they have saved enough money and reached a certain level of achievement in their career, they can finally breathe easily and enjoy life on their terms. But if retirement means continuing to work in some capacity, does it make sense to keep waiting for the future to live your best life? By working longer, and continuing to earn an income, this gives you an opportunity to live your ideal life far longer than we have in the past.
At WealthChoice our thought is that financial planning for retirement should focus on living life for today, and continuing to work longer in the future. Rather than putting off travel and leisure, perhaps we have jobs that might pay less, but offer us lifestyle benefits that bring us real value to our lives. If we know that a client may continue to work 10 or 15 years longer in life, even if not at the same level of pay, this changes their financial situation.
HOW DOES THIS CHANGE PLANNING FOR WOMEN?
According to statistics, the average women retires at age 62 and lives about 30 years in retirement. From a financial planning statistic, this means the client needs to have enough money to replace their pre-retirement income for 30 years. We planners have focused on how big the pot of money is when the client plans to retire so that they can take out 4% per year over 30 years, with the goal of not running out of money. But if the client keeps working past 62 and possibly even past 70, this allows their portfolio to continue to grow, their social security benefit to be deferred and grow, and allows them to spend more when they are younger, knowing they will continue to contribute to retirement longer than in the past, and to be needed for fewer years in retirement.
Planning around working longer has its challenges and does not replace saving for retirement. As we know, life is not certain. A survey from Voya Financial reported that 60% of Americans retire earlier than planned due to health, job loss, or need to care for spouse or dependent. This underscores the need to plan and to consider all alternatives.
However, we do think that it is possible to have fulfilling careers now, and into the future, that allow for the quality of life our clients are telling us they value.
Financial planning needs to take into account the change we are seeing in the definition of retirement, and plan for a way that allows our clients to be financially secure, given this change, while allowing them to live life on their terms. We executive women work so very hard for a quality of life down the road. Our goal is to help you live that life now, and long into the future with better planning.
To learn more about how we help executive women plan for a fulfilling life, now and for the future, contact us.
