Rethinking retirement planning

One of the key elements of traditional financial planning is to prepare for a secure retirement. But the idea of accumulating sufficient savings to finance a comfortable lifestyle for 30 years may be an impossible dream for many Americans. For others, the notion of decades of leisure conjures up nightmares for those who can afford to stop working but don't want to. Yet conventional financial planning focuses on how to generate income from savings once a client stops working. Maybe it is time to revise that essential notion that retirement means never working again, as well as updating the words and tools that advisers use to develop financial plans. “I totally believe in financial planning, but it does not pivot around my employment,” said George Schofield, 68, a noted business consultant and public speaker specializing in organizational psychology and career development. “I plan to remain partially employed for as long as I can, and I want a financial adviser who helps me plan for my quality of life.” Mr. Schofield, a former vice president of Bank of America Corp., is the author of “After 50 It's Up to Us: Developing the Skills and Agility We'll Need” (The Clarity Group, 2007). By 2015, 77 million Americans will be 50 to 69. They will require flexibility and innovation from their advisers as they try to navigate this new phase of life.

New definition

The combination of increased longevity, the collapse of the traditional pension system and the fallout from the Great Recession means that this generation may transform the definition of the word retirement. Mr. Schofield, who wrote his book before the financial crisis, is working on an updated version. “Even with great planning, we will have to be more agile than ever,” he said. “We'll have to invent our lives and aging for ourselves, probably more than once.” Mr. Schofield, who recently added college professor to his long and growing resumé, said that if he were going to create a class for financial planners, he would create a list of outdated ideas in need of rethinking. That list would include the assumption that everyone wants to retire; that all clients want the same thing; that aging is a long, slow decline, as opposed to many years of vibrancy for some; and that it is possible to create a plan and stick to it. “We have to have plans, but I think they are going to look more like sets of intentions,” Mr. Schofield said during a telephone interview from his home in Sarasota, Fla., following his daily 18-mile bike ride. “In the past, a plan was considered successful if it was executed flawlessly,” he said. “But to me, a plan that adapts to what happens is what I consider a success.”

Evolving roles

Both in his book and during our conversation, Mr. Schofield focused on the importance of individuals' personal responsibility for their health and finances, and for maintaining crucial community connections as old roles, such as parenting children or working in a particular job, disappear. Aging is less about growing older and more about becoming someone or something new, he said. It seems that Mr. Schofield's prescription for successful aging shares some universal truths described in another book, “Well Being: The Five Essential Elements” (Gallup Press 2010) by Jim Harter and Tom Rath. Mr. Harter is chief scientist for Gallup Inc.'s international workplace management and well-being practices. Mr. Rath is head of Gallup's workplace research and leadership consulting around the word. Based on Gallup's comprehensive study of people in more than 150 countries, the book reveals five interconnected elements of well-being that shape our lives: career, social, financial, physical and community. Although money may not buy happiness, financial security is a key element to making life worthwhile. “Well-being is about the combination of our love for what we do each day, the quality of our relationships, the security of our finances, the vibrancy of our physical health and the pride we take in what we have contributed to our communities,” Mr. Harter and Mr. Rath wrote. “Most importantly, it's about how these five elements interact.” Although 66% of people are doing well in at least one of these areas, just 7% are thriving in all five, Mr. Harter and Mr. Rath wrote. Maybe that should be the clarion call for advisers: the 7% solution to help your clients achieve the best lives they can by adapting and thriving as conditions change. Advisers might want to add these two books to their own reading lists and recommend them to clients facing the next phase of life. Aging advisers need help in figuring out how to keep doing what they are doing at a more leisurely pace or to reinvent themselves.