Planning for Retirement vs. Planning for Quality of Life
Retirement can feel like a faroff concept, and the deluge of news — and conflicting viewpoints — on the topic could cause confusion and anxiety around how much we should be saving. Hartford Funds’ John Diehl, Senior Vice President of Strategic Markets, discusses the three questions identified by the MIT Agelab that financial advisors can ask their clients to assess how prepared they are to live well in retirement.
What makes retirement feel so elusive?
Starting at a young age, we’re encouraged to save for retirement, but most people don’t know what exactly they’re saving for or how much they should be saving. Retirement is completely unknown until we’re actually in it, so it’s natural to think of it in the abstract. Compounding the already-ambiguous nature of retirement is the media coverage — there are countless news stories about changes to the traditional retirement landscape, what retirement costs, and at what age it’s ideal to retire. The overabundance of information and the distance people feel from retirement can make it seem intangible.
How can an advisor make the concept of retirement more tangible for their clients?
Advisors should help their clients create a vision for their retirement. Finding out what they want, need, and hope for in retirement, and then developing a financial plan around those interests, can help clients realize why they are making the investment in the first place. If they have a custom-built vision to work toward, clients may feel more engaged and motivated to have and execute on the retirement conversation.
What are the questions that financial advisors should ask clients to gauge their retirement vision?
Dr. Joseph F. Coughlin, PHD, Director of the MIT Agelab, identified three simple questions:
1 Who will change my light bulbs? 2 How will I get an ice cream cone? 3 Who will I have lunch with?
What do these questions have to do with retirement?
Although these questions seem unrelated to retirement, they are designed to enable the advisor to uncover important factors that can help determine their clients’’ future quality of life. These questions initiate conversations about the clients’’ plans for where to live, how to get around, and how to spend their time in retirement, so they can be a great starting point for advisors to find out more about their clients and to engage them in planning for a satisfying retirement. The questions also inject a bit of realism into that vision of retirement. The media counsels us to think about bike rides on the beach and rounds of golf, but we find that things that bring purpose and meaning, and our ability to access those things, actually are what quality of life is all about.
When should an advisor ask clients these questions?
Advisors should incorporate these questions into the comprehensive retirement planning conversations they have with clients. Planning is integral to living longer and better, and being fully prepared for retirement means knowing what to expect from both a quantity and quality standpoint.