Is Retirement an Option or a Mistake?

Between the Issues
Is Retirement an Option or a Mistake?
by J. Peter Lindquist

Clark Ewald claims that he made a successful transition into retirement "by the third stoplight on my way home from work on the last day."

Not so for Peg Zarlengo. She had trouble with the transition but in time was able to adjust. "I was a workaholic and my work defined who I was. At first, I wasn't sure who I would become when I didn't have that."

For Denis Nock, retirement was a more formidable challenge. He tried it for 15 months but had to give it up. "I assumed I would stay retired, but I wasn't doing very well at it. I just wasn't mentally stimulated enough."

With Jean Barr, retirement never even had a chance. She founded her company when her kids were headed off to college and most of her friends were just starting to think about retirement. Now in her eighties, she goes to work five days a week—and loves every minute of it!

Wants and Needs

Is retirement an option or a mistake? It depends on who you are and what you want out of life. What is clearly the right decision for one person is just as clearly the wrong decision for another. Understanding this is doubly important for financial advisors because it affects retirement planning for both themselves and their clients. And the simple truth is that a successful retirement depends on much more than good financial planning and astute investing.

New retirees cannot know exactly what the future will bring because there are uncertainties in life, just as there are uncertainties in investing. But financial advisors, whether they are analyzing their own needs or those of their clients, would be well advised to learn more about the changing realities of the retirement experience. The better we understand tomorrow's probabilities, the more effectively we can plan for them.

This is not an original observation. The most successful business people in history— from John Jacob Aster in the eighteenth century to Andrew Carnegie in the nineteenth to Bill Gates in the twentieth—have outdistanced their competitors by capitalizing on their ability to predict changing customer wants and needs.

Financial advisors are not always so prescient. They frequently do a good job of assessing clients' risk tolerance and matching financial products and services to meet risk profiles. But they are less likely to be aware of the nonfinancial ramifications of retirement—or about the critical role that nonfinancial considerations play in affecting retirees' long-term happiness and fulfillment. The advisors who become more knowledgeable about these life-changing concerns are likely to be better planners, build stronger client relationships, have lower client turnover, and enjoy more referrals than those who don't.

Understanding Today's Retirement

Retirement has long been derided as the depressing period of time between the end of work and death. This unfortunate image is understandable. Years ago, retirement lives were typically short and plagued throughout with deteriorating health. Even today, the word "retirement" often triggers negative thoughts because it is viewed as withdrawing from active involvement or becoming nonproductive. But that is not at all what today's retirement looks like. The retired people who are most happy and fulfilled are deeply involved and engaged in life. In fact, an AARP study of the next retirement generation—baby boomers—found that 80 percent of them expect to work at least part-time during some of their retirement years.So retirement no longer means "not working." Now it is the post-career period of life during which most of us can live our lives as we choose. For some retired people this includes working. But the work plays less of a consuming role than it did earlier in life. There is more freedom, less stress, and more time to explore other interests. For many people, retirement is one of the best chapters of their lives.

Who Should and Who Should Not Retire?

Working offers many benefits, some of which we rarely think about. In addition to income and health insurance, work provides a sense of purpose and identity, the satisfaction of feeling productive, daily focus and structure, interactions with people, the joy of feeling needed, personal challenges and growth, and a sense of pride and accomplishment. Some people are able to duplicate these benefits outside of a working environment. Others either cannot or do not, which means they risk becoming bored. And whoever becomes bored invariably becomes boring.The people most likely to have problems making the transition into retirement tend to be more focused on what they are leaving behind than on what they are moving toward. They usually have some of the following characteristics:

  • A single-minded commitment to their work
  • Identities that are tied to their jobs
  • Limited interests beyond their careers
  • Social lives that are closely integrated with their working lives
  • Challenging, high-visibility jobs
  • No established retirement goals or expectations
  • Retirement forced on them before they have mentally prepared
  • Feelings of incompleteness because career goals have not been met
  • Inadequate financial security
  • Major personal problems after they retire
  • Few friends
  • Incomplete relationships at home

Each of these contributes to transitional problems, and the more of these characteristics an individual has, the more likely that person is to experience difficulties. And those difficulties will affect whomever he or she lives with as well.

Retirees who are not saddled with these limitations will probably thrive in retirement. They are better prepared to adapt to a changing environment, become involved in new activities, and enjoy their evolving lives.

Beyond the Transition

The challenges are not over when a successful transition into retirement has been completed. In fact, the first of the three phases of retirement is just underway. During the initial phase, we typically are in good health, are charged with pent-up energy, and have unfulfilled dreams to pursue. In this active phase, the pace of our lives may approach or even exceed the pace we maintained before retirement. We are "on the go" and are constantly crossing things off our lists.

After a period of time, however, many of us will want to slow down. This may be because our earlier dreams have been fulfilled, our energy has declined, or certain health limitations have surfaced. We enter a second, more passive phase, a period of reduced activity. But that does not mean our minds start to languish or that we cease to have an interest in personal growth. This phase is often characterized by more introspection, and it lasts until deteriorating health and related age issues become so prevalent that they dominate our daily lives, severely restricting our mobility and capacity to carry out daily tasks. At that point we enter the third phase, during which we may require assisted-living arrangements.

New retirees may be aware that they will have changing financial needs as they age, but most do not understand that their other wants and needs will change even more dramatically. People usually plan for their retirements with the expectation that they will not experience the physical or mental degradations that affected their parents' generation. They don't want to think about the possibility of flagging health, just as they don't want to think about long-term health care insurance, long-term living arrangements, or their own mortality. Even subjects that are less threatening, like changing relationships with friends and family and organizing personal affairs, are often overlooked.

While continuing to work may divert attention from aging, it won't prevent it from happening. In time, reality will force these issues whether we have our heads under our pillows or not. Those who properly plan for the future are more likely to achieve lasting happiness and fulfillment than those who wait to be blindsided by the unexpected.

Risk Tolerance in a Different Light

Financial advisors know that risk tolerance is directly affected by work status and future expectations. But it is clear that the risks associated with retiring from the workforce extend well beyond the financial arena. While some people will find stimulation, happiness and fulfillment in retirement, others are more likely to find frustration, anxiety, and feelings of incompleteness.

Brad Bickham, president of the Boulder, Colorado, wealth management firm Sargent Bickham & Associates, put this in perspective for financial advisors:

We are wealth managers, not psychologists or counselors. Our clients expect us to do an excellent job managing their accounts, and that is where our energies are focused. But we also know that their long-term happiness depends on more than just their account performance, and sometimes they want to discuss other issues with us. If we can help them when they are making decisions about when to retire, how to handle money issues with their kids, or other issues they face in retirement, we want to do that. When we do, we just build trust and stronger relationships with our clients.

The Keys to a Successful Retirement

When I was researching and writing Solving the Retirement Puzzle, I interviewed more than 100 retirees about their retirement experiences and the lessons they had learned. The four people cited in the introduction to this article provide a brief glimpse into the widely varying attitudes that people hold. Because of the huge disparity of opinions, generalizations about retirement are suspect.

I learned, however, that vocational achievement does not necessarily lead to a successful retirement. In fact, career-focused people often have greater difficulties with the transition because they perceive that they are giving up more than they are gaining. Finding happiness and fulfillment in retirement depends, in part, on our ability to rekindle the passion and excitement we previously experienced with our jobs.

So there is more to a successful retirement than good physical health and financial security. To be successful, we should be mentally prepared. We should be grounded in reality as we plan for the future. We should let go of the past and focus on today's possibilities. We should retire to something rather than away from something. We should identify our greatest interests and direct our energy to them. We should have strong personal relationships we can rely on. We should be adaptable and recognize that a successful retirement will not be determined by the problems we face, but by how we deal with the problems we face. And we should remain positive and involved. Our lives will be more rewarding if we continue to be contributing members of society.

What should you take away from all of this? People who learn more about the realities of retirement life will be able to plan more effectively, cut their nonfinancial retirement risks, and increase their chances for a successful retirement experience. And the financial advisors who understand this will be able to capitalize on the opportunities it presents.

Reprinted with permission by the Financial Planning Association, Journal of Financial Planning. For more information on the Financial Planning Association, please visit or call 1-800-322-4237.