For baby boomers, the process of adjusting to the precipitous decline in their retirement savings has almost been akin to grieving for the loss of a child. They don't know where to turn or who to trust moving forward.
It is a form of mourning, because when someone looks ahead, they have to give up the vision of what they had and where they thought they would be in order to assess where they are right now and create a new story going forward, based on different assumptions. If they are hanging onto that old story, hoping that something will change or hoping to recapture it, that takes energy and focus. That disallows someone from being solidly in the moment and making the choices that are best at this moment.
I had a client who could not get beyond the amount of money she had lost, probably 60 (percent) to 70 percent of her entire savings. She said, "If I sell, I will have lost all of that." And I reframed that to say, right now, if you have $2 million, you have $2 million, whether that came from $50,000 or whether it came from $8 million. Right now, your choice needs to be fully on what you want to do with your money, and the decisions now and next.
You point out that we treat different categories of money differently. What are our blind spots when it comes to our retirement savings?
So much of retirement savings is focused on money. A true autonomy would be to not have to depend on anyone else in retirement, be it government, children or family members. Now, I know that's ideal, but in addition to saving money, the best preparation for older years is wellness. Health and money; those are the two things I hear most consistently in terms of concerns for the future. There are ways to plan on a daily basis and have a daily commitment for wellness just as for money. You work out every day. The commitment is a decision you only have to make once and then it can be automatic.
One of the biggest disconnects we have about retirement income is that it seems to be working in two directions. After all, retirement is supposed to relieve you of the stress of working for a living. How do we change our money story to resolve that conflict?
I think the backdrop has to change. We're not looking at retirement as all or nothing anymore. We're looking at combinations and various permutations that are both necessary and desirable. One thing you could consider is that regardless of your money story, the one reality that money determines is choices. One way to think about that is to begin at the end, to envision what choices you want and back into that. When you visualize something, that creates a change in the brain; the same part of the brain lights up when you create a vision as when we actually see something. So when we revisit that vision, we etch it in our brain. So you can actually etch the experience of success and find a way to get there.
How do you recognize and change your money story when you now doubt your financial advisers?
I think the answer lies in the process of questioning formulas. Formulas may not work in the same way or apply to everyone. There's not a formulaic answer. I think it is more an individual answer.
What it calls into question is really looking at planning and overcoming an optimism bias that we all have that things are going to work out, that we will get funded somehow and we'll be healthy forever. It really calls into focus the need to realistically envision what life will be like between years 75 and 100, and where income will come from. Not to worry about it, but how to plan for it.
I think the increased life expectancy is causing some very different thinking about it. This is one of the reasons that wellness as well as money is so important, because health care can take up such a huge part of that, as well as feeling crisp and energetic day by day.
Is it time to simply retire the whole retirement model? Is it outdated now?
I believe increasingly it is, and will be. Probably something like transition may replace it, because there will be a transition rather than it being all or nothing for many people. Some of the very healthiest and wealthiest people say they don't really plan to stop working; it's something that is vital, that they feel energy for and they want to make a contribution.
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