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AICPA Personal Financial Planning (PFP)
Your Clients Can Afford to Retire. Will They Enjoy It?
00:32:26
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- [00:00]
A
Foreign I'm Kari Sinnett and this is your Personal Financial Planning podcast. What if the hardest part of retirement isn't money at All? For many high achieving professionals, retirement quietly disrupts identity, purpose and the daily sense of progress that once came from work. Today's guest has spent decades studying what truly drives motivation and creativity and of course, well being. And our latest research reveals why so many retirees feel unprepared for what comes next, even when the numbers say they're ready. We're exploring the psychology of retirement, the hidden transitions no one talks about, and how to design a post career life that actually works. Welcome to the American Institute of CPAs Personal financial planning Podcast. I'm Carey Sinnott. As the leader of the PFS designation, the Financial Planning Credential exclusively available to CPAs, my role is to keep you informed, educated and connected to a premier community of thought leaders delivering trusted financial planning. We explore the full range of planning topics and the current events shaping our profession. If you're an advisor, a CPA financial planner, or simply want an inside look at today's topic of retiring, well, this podcast is for you. Today's guest is Dr. Teresa Amabile, the Edsel Bryant Ford Professor Emerita of Business Administration at Harvard Business School and one of the world's leading researchers on creativity, motivation and well being at work. She's the author of the Progress Principle and more than 150 scholarly articles and her research has shaped how organizations understand engagement, innovation and meaningful work. And her latest book, Creating a Life that Works for you draws on extensive research and interviews to explore the psychological life design challenges of retirement, offering a deeply human, research based guide to navigating this major transition. Teresa, welcome.
- [02:32]
B
Thank you so much Carrie. I'm really excited about speaking with you and your listeners today.
- [02:38]
A
You know Teresa, this is such an important topic for financial planners because clients don't experience retirement as a spreadsheet. The greatest risks in retirement are increasingly psychological and behavioral and those risks directly shape decision making, spending and even long term wellbeing. The quality of a client's life and retirement is inseparable from the quality of the financial outcomes we're trying to help them achieve. It reflects how our clients view their whole life, not just their balance sheet. And we should, I think, be prepared to help them process and think through identity, purpose, structure, meaning with the same care that we apply to cash flow and taxes and investment strategy. Now Teresa, much of your career has focused on how progress, motivation and let me call it that inner work, life, shape performance and well Being at work. But in retiring, you explore what happens when work is no longer that central organizing force. What surprised you most about how retirees experience motivation, meaning and emotional progress once the structure of work is removed?
- [04:05]
B
Wow. Carrie, I'm going to start with a surprise we got from the people who were approaching retirement. Okay, these were people age 55+ that we interviewed who had not yet made a decision on exactly when they were going to retire. But of course they were thinking about it, given their age and status in life. These were all financially secure people. We only selected volunteers who had on a screening questionnaire who had indicated that they were in at least reasonably good health, that is on a five point scale. They gave themselves a 3, 4, 5 on physical health, and they gave themselves a 3, a 4, or a 5 on financial security. So they were basically doing okay in their lives and their personal health, certainly their finances. In our interviews, we used a short word association game at one point and we said a number of words having to do with work, career, retirement, of course, and asked them to say the first thing that popped into their head. So one of the words, not surprisingly, was retirement. We then created and we asked this question. Of all 120 people we interviewed, about 40 of whom were in that age 55 plus, but still working subgroup, we created a word cloud of the responses people gave. And you know how a word cloud works. The larger the word, the more people said it, or a close synonym. I was shocked when I looked at the word cloud. For these still working, older professionals, the most prominent words were negative. They were things like scary, never far away, unknown. Yeah, of course there were a number of positive associations, but they weren't as prominent in the responses from these folks. And the word fun was very small. It was there, but it was very small. On this word cloud, the biggest word was scary. So I was really kind of distressed by that. And I just have to tell you, this one person we were interviewing, and this is not an uncommon sentiment in this group, said that facing retirement was like staring from the edge of a cliff into a void. So where did this fear come from? It wasn't from being financially insecure. It was fear of the unknown. And as we delved more deeply into the substance of the interview questions we asked the responses that we got, we realized that people, many, many accomplished professionals, have a dread of retiring because it is such an unknown for them. So our aim in putting together our research results and writing the book that we wrote and in talking to people like you and your audience is to give an insight into what the retiring experience is really like. Show some ways that can be navigated and relieve that fear. Footnote here. I keep saying we. I did not do this research alone. I had four amazing colleagues doing this research over a period of about 14 years. And they co authored the book with me, Lottie Balin, Marcy Curry, Tim hall, and Kathy Graham. All accomplished professionals themselves in the realm of academia. So that was a surprise from the pre retiring people. Would you like to hear a surprise from the retired people?
- [08:03]
A
Absolutely. Yeah. You know, this reminds me just that big surprise and shock and concern about retiring. It's kind of like if somebody has never been on a plane before or even on a boat out on the ocean, they can see the vehicle, the plane or the boat or whatever. But it's very difficult to just describe what it's like to be in the air or on the water. And often to our pre retirees, that's what it feels like is this endless vista of what happens next and what is it going to be like? All right, so tell us, what was the shock that came from people who did retire?
- [08:43]
B
Well, the big surprise was most of these terrible fears people had were completely unfounded. The vast majority of the people that we found followed throughout retirement. There were 14 people that we interviewed over and over and over again. Thank you. 14 people. Because we kept coming back to them over a period of years as they finished their careers, went through the retirement transition, and lived their first few years of retirement. So we got some real insights from those that we followed longitudinally. But also the people who had retired already, and we had interviewed them just once, we found that the vast majority of them were at least reasonably content in their retirement life. So everyone who's facing retirement can breathe a sigh of relief and they can reassure their clients. You are likely to feel just fine about retirement once you've made the adjustment. The adjustment can be a rough one, though, and we'll talk about how people can navigate it so that it's a little smoother, a little bit more pleasant. One thing that surprised us was the variety of experiences that people had. There is not just one right way to retire. That came through loud and clear. We thought maybe we'd find a silver bullet. Oh, if you just do these few things as you're preparing or soon after you retire, then it's going to. It's much more likely to work out fine for you. Well, no, it's not that simple. There was a lot of variety. What we did find in common was that everyone who retires in the US at least has to go through four tasks they have to deal with and get engaged in the four tasks of retiring. Retiring takes work. The work can be enjoyable, it can even be exciting. But it does take time and effort and attention to have a smooth transition into a satisfying retirement life. So the first task is making the decision. And that is a really difficult task for many people. I said the US because as you know, in some other high wealth countries, industrialized societies, there's not so much choice in when you retire. There are mandatory retirement ages, but it's illegal to have a mandatory retirement age for most professions in the United States. So that decision to retire is task number one. Task two is detaching from work. Yes, you have to tangibly detach. You have to hand in your paperwork, you know, inform your managers, the top leadership, you have to, you know, do all the HR paperwork and all of that, hand off your tasks. But the more important and difficult kind of detachment is detaching psychologically from your work. The third task is beginning to build a provisional retirement life for yourself. And that involves exploring, experimenting and putting together some elements of a provisional retirement life that you're trying out. And the fourth task is consolidating a more or less settled retirement life from those provisional elements. The tasks don't always happen in that same sequence that I just gave, but there's no way to avoid them if you are going to be going through the retirement transition. So that's common. However, the ways in which people approach these four tasks can vary widely and still be good experiences. But we did see some people who had bad experiences, but as I said before, the majority had good experiences. But I cannot tell you that there was one correct route, because there isn't.
- [12:46]
A
That is so interesting and the book emphasizes just what you said, that retirement is not a single event, but a multi stage transition involving. And I'm just going to peel out a particular class here. For individuals whose professional identity has been deeply entwined with competence, contribution status, what are the most common psychological pitfalls you observed in that particular segment and what helped people navigate that transition successfully?
- [13:19]
B
Whoa, that's a big question. I'm so glad that you've already hinted a couple times that identity is being really important. Important, absolutely. That is one of the big sources of variation. Different people vary in how closely they identify with their work, of course, and that is one of the main differentiators in people's experience. And relationships are another source of variability. The strength and number of at work and outside of work relationships that people have. And also just people differ so much in their view of life and what a meaningful life is to them. And that that accounts for a lot of the variation. There are, I would say, three big psychological challenges faced by a large percentage of our professionals that we studied as they approached and went through retiring. The first is loss of the professional identity. You know, facing that loss and coming to terms with it, especially obviously for people who did identify very closely with their work. You know, one of the questions we asked was, would you be more likely to say that your work is what you do or your work is who you are? We had a lot of people saying, oh, it's who I am, it's who I am. Not everybody. There was, you know, there were many who said, you know, it doesn't define me, it's what I do. But even some of them found that they did have struggles with that loss of the professional identity as they were trying to make the decision and as they were first going through the retirement transition. We saw a few different ways that people could navigate that, that identity loss successfully. One is what we call identity bridging. Some folks who engaged in this focused on an important piece of their pre retirement identity and figured out a way to bridge that identity, to carry it with them across the retirement bridge, if you will. Very creative ways. We saw, uh, there was one participant that we call Jay, who was at the very top of his organization. It was a, it was a mid sized consulting firm and he was one of the partners of this firm. It was relatively young firm, so there weren't a lot of partners. They didn't have a lot of employees in this company, probably about a thousand all told, across a few different offices. He was at the top, one of the top leaders, right? And he was leading one of their main offices. That leader identity had been important for him, although he felt a bit conflicted about it. He was always focused on the differences between background between himself and the other leaders of the firm. But it had mattered to him that he was a leader. And I know that's gotta be true for many of the clients that your listeners work with. He was feeling the loss of that identity when he retired. And he bridged it in a couple of ways. One was that he accepted his former partner's invitation to take on a couple of projects after he retired and to work on them on a consulting basis. These were internal projects, making some important changes within the firm, doing the research into what would be the best way to effect these changes. He had been engaged in these before he retired. And they really wanted him to see these projects through. They valued his expertise. He was really uncertain about whether to do it the first time I interviewed him or maybe the second time. It was shortly before his official retirement and he still hadn't decided if he was going to take on these projects, but he ditched very shortly after his retirement date. He called them up and said, yeah, okay, I'll do it. And it was just maybe three days a month, three, four days a month of work. He could do most of it remotely, but that allowed him to maintain that engagement with the firm. So he did that as a way to bridge that identity of being an important member of this firm. The other thing he did was to recapture a long ago identity that had been important to him when he was a young guy. When he was a teenager and a young adult, he loved hot rodding. Do you know what that is?
- [18:05]
A
Yeah, I think so. Tell me about it. So is it like the American graffiti hot rodding, where you soup up a car and go drag race? Is that what you're talking about or just making an old car nice?
- [18:18]
B
Yeah, yeah, that's. I mean, that's basically it. As Jay described it to me, it's always the element of getting a car right and in some ways souping it up or making it look really pretty or jazzy. Just customizing it in some way. That's a big piece of hot rodding is working on your vehicles, often with other hot rodders, and you're kind of sharing tips and admiring each other's work, and that's a lot of the fun of it. And rather than drag racing for the older hot rodders in the world, it's usually going to rallies where you just parade around in your vehicles and admire each other's vehicles and go on long rides together, that kind of thing. And sometimes racing, sometimes racing, but there's less of that drag racing aspect for people. 60 plus as Jay was car shows. Exactly. He had given this up when he became so engaged in his consulting career in his 20s, and when he and his wife had kids, you know, it just didn't fit his lifestyle at that time, and he just completely gave it up. But it never stopped calling to him. And as he was approaching retirement, he bought himself a car and he began to customize it in a garage, his garage. And man, Carrie, that was a great identity bridge for him. So that's. That's an important thing mechanism.
- [19:44]
A
I love that so much because finding that bridge. And as financial planners, we. We are often among the Last professionals to work closely with someone before and then, of course, after they retire. And I really saw in your research how I think planners can help their clients move beyond just financial readiness, but help the client think about these bridges, anticipate what would motivate you in a life afterwards with. And we have to, I think we have to be careful not to overstep our role into something that we're not trained for. But, you know, often people who are doing their job well for 10, 20, 30 years, they are doing it well, and then they're facing something that they haven't done at all yet. Retirement. So as financial planners, when a client is doing retirement well, what does that look like in practice?
- [20:47]
B
Well, it looks like they're not avoiding these challenges and they're not avoiding the four tasks that I mentioned. I think it would be pretty obvious to the people in your association to professional financial planners, if their clients are avoiding retirement in ways that are not healthy for them. Depending on how well you know the client, you might be able to pick up on the fact that they're staying in their job not because they necessarily love it so much anymore, not because they're, they're finding it incredibly rewarding and engaging, but because they don't know what else to do with themselves or they just can't imagine who they would be without this career. So it does get back to that identity challenge again. And so I think that you'd be able to tell if somebody's struggling and if somebody's being planful about not just do I have enough financial security to retire, but do I have a sense of what I'm going to be doing with myself after I retire? That's the sign of someone who is engaging in it in a psychologically healthy way. Let me quickly mention, Carrie, the other two big challenges. The second one is facing the loss of professional relationships that you may have built up over decades in a career. And those relationships, of course, are very precious to us. I'm, I'm sure you have some. Right. I certainly do.
- [22:21]
A
Yeah, I was just thinking of that.
- [22:23]
B
We saw people deal with that effectively, and I think that your financial planners might get a hint that people are dealing with it effectively if they seem to be proactively deciding which of the relationships they have they want to double down on and, and, and invest in more deeply now that they have more time. I mean, that's the big thing, right? You, you. There was something else that you were doing for probably decades of your life for 40 or 50 or 60 or more hours A week. And now that time is yours to do with as you wish. And one thing that we saw some of our highly effective retirers do was to think about are there work relationships that I really want to retain and how is that going to look now? This person's going to be busy during the weekdays when I'm not, and we're going to have less in common. Have we established enough of a social connection outside of work that we can maintain it? And how can we take steps to do that? And also doubling down on the personal relationships, the non work relationships you have that are important to you. For example, we saw many people spending a bit more time with their teenage or young adult children. It wasn't always welcome. You have to explore if it's going to be welcome. But that could be a great thing. And it was for we had this one retiree named Ann, whose kids were still teenagers when she took early retirement. And she really became a big help to them, helping them develop their sporting careers. They were both avid athletes in high school and, and she helped them in various ways develop that. And she helped them if they were struggling with their academics, that was very rewarding to her. And at least by her report, it was rewarding to them as well. We saw connecting more deeply with siblings and other relatives that they just hadn't had time for in the past, friends that they had maybe let go by the wayside. So that's a very effective way way of dealing with the relationship challenges. And that third challenge is life structure. Your life is going to change when you retire because this thing that was giving a rhythm and routine to the days and weeks and months and years of your life is gone now. It was providing a lot of structure and it's not there. And that restructuring of a life can be really fun and exciting if you can take an explorer's attitude toward it and say, all right, I'm going to try out some activities maybe that I used to engage in, but I let go by the wayside as I got busier or things that I've always thought about doing, places I've always thought about going. It's really appropriate to start thinking about that at least a bit as you're approaching retirement. Some people like to plan it out and that's fine. Other people want to have a few ideas in mind, maybe do a little bit of exploration. And then after they take their rest of a couple weeks, most people feel like they just need to be like on vacation, even if they're at home after they retire. That's Great. But then do that exploration. So those are adaptive ways that your listeners might suggest to their clients. You're not psychologists. You can't do that deep coaching. But you know what you can suggest to your clients that they think about what their life will be after they retire. What would be really appealing, what could they imagine and encourage them to talk with others about that, whether it's a spouse whose viewpoint they really value, whether it's a close friend or relative sibling who's preceded them in retiring or, or a retirement coach. So one of our participants, who we named Donna, engaged a retirement coach for three years before she retired. And that made all the difference to her. She, she couldn't say enough about how valuable that experience was. Other people might have a therapist that they work with that they want to focus on this topic, or a life coach. But it's useful to find someone that you can really work through these issues with. What is my life going to look like and who am I at this point in my life? You know, the self and the life structure need to fit. They need to be aligned. You need to have a pretty good understanding of who you are at this point in your life. What are your most important identities, values, needs and priorities and not who you were when you were at the peak of your career, but who you are now. And take a clear eyed view of that and a clear eyed view of to what extent does your life really fit you right now?
- [27:33]
A
You know, financial planning often focuses on readiness from a numbers standpoint. But it's so crucial that we are at least offering those the thought process to our clients to be thinking about what does your life look like beyond the numbers? Because what happens to them, what their life looks like on the other side of the spreadsheet is just as important to how well they're doing in life. And that's going to affect us as financial planners. And so making sure to at least address both of those, to put it on the table, so to speak. Your work suggests that life satisfaction depends often on psychological, as you've talked about, and social readiness. And so as we kind of wrap things up here, if you could give one piece of advice to our professionals who help people prepare for retirement, what question should they be asking clients to kind of put this up on the table long before their retirement date even arrives?
- [28:43]
B
Carrie the one question would be, dear client, have you thought about, and maybe talk to loved ones about what your day to day life could look like after you retire? Yeah.
- [29:00]
A
And being intentional in them structuring what their day to day life looks like after retiring and not just letting it happen to them.
- [29:10]
B
Exactly, exactly. You know life will happen and you need to adapt. There are things you can't control, but you know there are things you can control. And being proactive, exercising agency where you can in planning and building that retirement life can stand you in good stead. And I'm gonna put in a tiny plug for our book.
- [29:33]
A
Please, please.
- [29:34]
B
The other question I would encourage your listeners to ask their clients is, have you read the book Retiring Creating a Life that Works for You? Because we go into all of this in much more detail and we tell so many stories that will show the variety of ways you can retire well
- [29:56]
A
and, you know, stories that I found that I could relate to and I think that people reading the book will feel that same way. Teresa, thank you so much for sharing with our community of listeners. And if you're an advisor out there listening right now who wants to deliver premier financial planning with confidence, consider exploring everything the AICPA PFP section has at aicpa.org pfp For $269 a year, AICPA members get access to a library of technical guidance so important webcasts, planning tools, and expert insights. Like Teresa, it's amazing how vast the information is and how helpful to our everyday practice. It's all designed to help you serve your clients at the highest level. This one's near and dear to my heart. If you're a CPA with 3,000 hours of financial planning experience already, consider showing your expertise in this financial planning area by putting the credential next to your name. The PFS. You can go to aicpa.org PFS and get more information there and start the process of earning that credential. This is our podcast together and if this episode helped you in your practice, we'd be grateful, really honored, if you shared it with your professional community. With almost 600,000 downloads so far, the AICPA PI podcast is helping advance the profession one listener at a time. This has been Kerry Sinnett for the AICPA Personal Financial Planning Division. Thanks for listening and until next time, keep earning trust through clarity, guiding with compassion, and delivering premier planning that elevates our profession.
- [31:45]
C
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