The New Retirement Narrative—And What 401k Advisors Need to Know

Perhaps it’s time to discard the idea of retirement altogether

401k, retirement, financial wellness,How do we ensure the jars are filled?

It’s no secret that Americans are facing a retirement crisis. Based on current trends, Americans will be confronting rates of elder poverty in the not-too-distant future that haven’t been seen since the Great Depression.

Professor Teresa Ghilarducci estimates that of the 18 million workers who were between ages 55 and 64 in 2012, 4.3 million are projected to be poor or near-poor when they turn 65, including 2.6 million who were part of the middle class before reaching retirement age.

The concept of retirement has changed dramatically in the decades since the introduction of the 401k, which has transformed the way people should think about and plan for retirement.

As defined benefit plans have disappeared, employees have shouldered an increasing share of responsibility and risk in saving for retirement. But mounting evidence has shown that defined contribution plans are not working. And an increasing number of people who have reached the traditional retirement age are not ready to retire.

More and more, people today are planning to continue working, for multiple reasons that include financial necessity, increased lifespans, and social connectivity.

In response to changing concepts about what retirement means and could look like in the future, retirement planning is changing, too. As participant contributions to employer-sponsored retirement plans have stagnated or declined in recent years, financially stressed employees are increasingly turning to their employers for help.

In response, employers are starting to provide financial wellness resources as part of their benefits packages, especially when realizing the significant cost of financially stressed employees in terms of lost productivity, absenteeism and turnover.

Advisors are reintegrating the whole person and their financial goals into the retirement planning process, and personalized advice is becoming the new norm.

The bottom line is that employees who are not meeting or barely keeping up with their immediate financial needs cannot save. Plan advisors have an important role to play in re-shaping the concept of retirement to help their participants confront a rapidly changing landscape. Advisors’ roles are shifting, too.

Perhaps it’s time to discard the idea of retirement altogether, along with the stigma that accompanies aging, in favor of a movement toward personalized financial planning and financial independence. Focusing on what people need to do now in order to support their ideal lives later is inherently more attractive, and offers the advantage of avoiding the cognitive bias of putting off saving until tomorrow comes.

Whatever we choose to call it—retirement, financial independence or annual income replacement—financial wellness is the starting point. Plan participants need to understand their financial situation, make a plan to reach their goals and follow through on it, so that they can handle unexpected expenses, make and celebrate progress toward those goals and live the futures they dream about.

Financial wellness helps make retirement dreams realities, allowing plan participants to focus on how they want to spend their time and on what’s important to them, their values and their lifestyle, knowing they will have the income they need to support these. By doing the right thing for plan participants, both plan sponsors and advisors can benefit.

*To download a whitepaper that expands on the ideas described here, visit

Martha Brown Menard, PhD is a senior researcher at Questis, a financial wellness technology company. An award-winning healthcare researcher and author, Dr. Menard is a financial wellness coach and a member of the Association for Financial Counseling and Planning Education. She is a guest lecturer at Georgetown University, and speaks frequently about women and financial wellness.

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