St. Louis Post-Dispatch

July 3, 2005

 

Check goals before advising

By Jack Naudi

THE QUESTION: What is retirement?

Four weeks ago, I wrote a column that attempted to answer the question "How much do you need to save for retirement?" I took a tortured path through some of the standard financial planning questions, and recommended that people continuously set aside about 10 percent of their salary until they retire.

My inside-the-box conclusion was this: "There are only three ways to ensure financial success: invest, invest, invest."

I'm standing by my advice, but with modifications.

Shortly after that column appeared, Jack White, a certified financial planner in St. Charles, sent me a provocative e-mail challenging basic assumptions about planning for retirement.

"Retirement is just an abstract concept that no one really understands," White wrote. "It's based on the huge assumption that not working is preferable to working, and I know a great deal of people who disagree with that assumption."

THE CHECK: Where do you want to be in 30 years?

The fundamental mistake I made, and White believes it's made in his profession as well, is not taking into consideration what working and retirement mean to people.

The groundbreaking research on this comes from Ken Dychtwald, a gerontologist and psychologist who wrote the best-seller "Age Wave." Dychtwald also is a senior adviser for AIG SunAmerica.

Dychtwald says that most retirees aren't happy because they've lost a vital part of their lives: the workplace. Older Americans don't necessarily want to return to a 40-hour workweek, but they want to be productive workers.

Dychtwald's work has started to filter down to financial planners such as White who now realize that the most important question to ask clients is not "How much do you want?" but "What do you want?"

"We have shoved people into rules of thumb about saving, into assuming that everybody wants to retire," White said.

This is not a knock against financial planners. Most of them probably are asking their clients what they want.

And, White says, most offer culturally conditioned responses about retiring to a nonworking, carefree life at some point in their 60s.

White probes deeper, through a process he laughingly calls "my browbeating."

"They begin to comprehend, and it's a release for them. They don't feel the pressure to accumulate large sums of money (for retirement)," he said.

THE BALANCE: Reality check, please.

Dychtwald's research presents an enormous challenge for individuals and financial planners.

People's values, goals and dreams are hardly constant. When goals change, investment allocations need to be modified as well.

If the goals change dramatically, that's where a financial planner will really have to earn his or her money.

There are dangers inherent in any plan that assumes someone will keep working well into their 70s. What if they get sick and can't work? Will they have enough money to live comfortably?

This is a debate worth having in the financial planning world. What's more constructive? Forcing people into a retirement they might not want but can afford, or moving them toward a golden age that might not be attainable?

THE LECTURE: Listen up, then act.

There is nothing easy about trying to help people achieve their dreams. But before handing out advice, the finance planners should understand what those dreams are.