September 2, 2016
Killing Sacred Cows
I’m reading an interesting book called Killing Sacred Cows – a book describing numerous financial myths. Over the following months, I will share a few of these with you. This week, I would like to look at retirement and a couple of myths revolving around its process. Last month, we discussed helping our clients rethink retirement and touched on the idea of continuing to work in retirement. This month, I will dive deeper into the true role of work in one’s life.
The role of work has changed over the last century, having moved from enjoying a vocation – e.g. the butcher, baker, and candle stick maker – to toiling away at tasks we eventually resent. The fact is that work is an important part of our identity as humans, it is part of who we are, regardless of whether that work is paid or not. I bet you know some people who stopped working completely when they “retired” – I’m also betting that some of those same people became pretty unhappy quickly. Not working can be a one-way ticket to becoming bored. As enticing as it may sound, completely dropping out of the workforce isn’t the answer.
Work was not always a dirty word. Having a vocation – a trade – was something people could be proud of and perhaps even pass on to their children. Once we entered the Industrial Age, however, rewarding work was replaced by mindless and thankless tasks.
Work plays a critical role in our identities, whether we realize it or not. Work helps us discover who we are and who we are not. Work and the workplace help define our social groups, friends, and to some extent our worldview on everything from politics to religion. Work also helps us discover our strengths and weaknesses, but also at a deeper level we find affirmation of our purpose on this planet and of our potential to positively impact others.
An irrefutable fact of our time is the potential collision at the intersection of work and retirement. I have had the privilege of discussing the retirement/work challenge with numerous retirees and would-be retirees over the course of the last decade. One of the things that I’ve learned is that work is an essential part of “retirement,” premised on balancing needs and wants. Traditional retirement used to focus on vacation, whereas retirees today want a balance between leisure and work.
We at Gainplan, work with clients who are in the midst of planning for that next phase of their life. Our relationship toward work matures as we spend more time in the workplace. Clearly, we are not the same at 40 years old that we were at 25, and we are certainly not the same at 60 years old that we were at 40. To help understand the role of work in our clients’ lives, let’s start with a definition of work:
“An engagement that brings value to others and meaning to me.”
Note that this definition allows work to include volunteering and does not exclude uncompensated activities.
Whether we choose to work for economic reasons, existential reasons, or a combination of the two, it is indisputable that the trend toward working longer is here to stay. Regardless if we want to or have to, we can no longer separate work from retirement. As the 15th Annual Transamerica Retirement Survey stated in December 2014, “Baby Boomers are revolutionizing retirement by overturning long-standing assumptions about working until age 65, calling for dramatic changes in current employment practices, and proving that retirement and working are not mutually exclusive.” Only 21% of survey respondents said they would stop working at retirement.
The catch? Not all employers are onboard – just 48% of employers are prepared to accommodate them. That’s where we come in. Not only is it critical to be sure our clients have a financial plan for achieving their monetary goals, they also need a plan for how work will play a role going forward.
The bottom line is that the retirement pitch for the last generation may have had the headline, “The Benefits of Leisure,” but this doesn’t deliver anymore. The leisure exclusive retirement is largely a mirage.
Understandably, over the past several years, our clients have been properly focused on the financial challenges surrounding retirement. But, what we also hear about are the nonfinancial retirement challenges that people face:
Sense of identity loss – You were Dr. Jones for 40 years. Who are you now?
Social/Relationship challenges – What if you actually enjoyed the people you were working with or calling on?
Change/Reduction in mental stimulation – Can that crossword puzzle or round of golf really fill the bill?
Psychological issues around not getting a paycheck – Inflation can quickly make you paranoid about going to a movie or dining out.
Extra time to fill in the day – Are you wandering in the garage for something to break so you have something to fix?
These are the real, existential risks of retirement that all of us must wrestle with. Add to this list concerns about money, inflation, and uncertainty in the markets, and it is no wonder that more and more people are coming to the same conclusion – it is better to continue working.
In a research study from Oregon State University, people who worked longer lived longer. All the money in the world won’t make a difference for those who feel they are losing their health, their connectivity, and their sharpness due to the lack of real challenge. Clearly, being challenged and active are now being mined not only for longevity purposes but for quality of existence as well.
Each of our clients has unique goals and needs – one size does not fit all – especially when it comes to retirement planning. They count on us to grant them permission to no longer blindly follow old assumptions and need our help in figuring out the right balance between means and meaning. It is essential for our clients to understand how work will fit into their future plans. Money is an obvious benefit and having more certainly doesn’t hurt. But the soul-searching doesn’t stop with cashing the check or counting the material benefits. The psychological, social, and intellectual benefits of work are much more difficult to evaluate for our clients, but it’s just as essential as balancing their portfolios.
This commentary on this website reflects the personal opinions, viewpoints and analyses of the Gainplan LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Gainplan LLC or performance returns of any Gainplan LLC Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Gainplan LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.