A myopic focus on finances too often ignores the emotional preparation needed to successfully retire, and it’s a problem, Patrick Delaney says. Delaney, vice president of T. Rowe Price Investment Services, delivered a wake-up call to attendees at NAPA’s 401(k) Summit Tuesday morning, hitting hard on the need for bringing more to the participant relationship than simply numbers.
“The industry largely focuses on accumulation for retirement, and we kind of pat them on the back and say, ‘Okay, call us when you get to retirement,’” he said in a conversation prior to the session. “But we’re aiming a new emotional preparedness initiative at people north of age 50, which is 64 million working people.”
Calling it “the 5 Ws of retirement planning,” they include:
- When are they going to retire?
- What are they going to do?
- Where do they want to live and visit?
- Who are they going to spend their time with?
- Why are they getting up and out of bed each morning (what gives them fulfillment and purpose)?
These questions are increasingly important, as T. Rowe research found that 74% of individuals within the demographic said they’ve done a good job preparing financially for retirement, but only 35% said they’ve done a decent job emotionally preparing for retirement.
“This is really about the non-financial side. We all too often equate retirement planning with just savings, but we overlook the most important part, which in a lot of cases has nothing to do with the finances. It has to do with the five Ws.”
For many, he added, it’s not a complete cessation of work, but a transition period that they haven’t thought through.
“We target age 50 because that’s a big milestone that naturally causes people to reevaluate their lives and take stock of what they’ve done up until this point. They have kids in college, out of college or out of the house, and spouses are looking at each other and thinking, ‘We have a lot of time and money on our hands, what do the next 10 to 20 years of our lives look like?”
Advisor services
Unfortunately, when T. Rowe asked advisors about the services they currently provide the demographic, Social Security guidance, tax optimization strategies and estate planning were overwhelmingly mentioned.
“Some advisors say the emotional transition is not really in their wheelhouse; it’s not a repeatable, scalable conversation and it’s going to be different for everybody, so any content tends to be financial in nature. There’s a gap we’ve uncovered in the industry for folks at that age.”
The program he concluded, is intentionally structured to these non-financial aspects so as not to replace or compete with the advisor.
“We’re not trying to come in with any other financial resources, solutions or guidance that they already bring to bear in that relationship. But once you create a retirement vision, it becomes a lot easier for the advisor to marry a retirement plan, product or solution to it in order to help make the vision a reality.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
