One of the biggest challenges we face as advisors is the retirement of a client. We may have spent 20 years or more with them in the ‘accumulation phase’. Once they learn the intense value of saving each month, they enjoy seeing their accounts grow. They are less than happy when they decline, but expect us to give good ‘talk story’ on the reasons why they seem to be losing money. They have added to their 401-ks, 403(b)s and SEP-IRAs wisely and effectively for years. Marriage, kids, houses, moves and new careers have not stopped their savings habits.

As a client approaches the year of retirement, he becomes stressed in an entirely new manner. ‘The time has come, the walrus said, to speak of many things…’ of income and retirement and ways to spend my time.

Virtually every client I have ever retired has responded through these ’12 steps’.

1.  Denial that they can ever afford to retire. Despite years of saving, they just can’t see how they can afford it.
2. Realize that the inevitable is approaching. Hopefully they will die soon after, so as not to impoverish their spouse.
3. Accept by their own personal authority that they have been doing a very good job of preparing for retirement. Ok. They get it. They probably can afford it.
4. Inventory their assets and record their expenses today. You mean it isn’t as costly as we thought?
5. Admit, finally, that they can, possibly, afford to retire. Maybe. In a few more years. Not now.
6. Accept the fact that the job position can be filled by another, less worthy successor. Well, less filled, than sitting in my chair doing less.
7. Refute a few more times the obvious – that they are setting themselves up fairly well. No, no. I can’t afford this. I need more time!
8. Actually make a retirement date and accept it as their personal guide. Or have it made for them by their ‘outplacement specialist’.
9. Do it. Retire. Walk through the door and keep on walking; no turning back. Just do it.
10. Now what do I do? Fix cabinets. Rearrange spice rack. Golf, fish, sail, bowl, hunt, entertain. Read the paper at the coffee shop for two hours each day. Take a nap. Take spouse to a movie and dinner – weekly. Have interesting conversations until the wee hours again. Sleep well. Ok. I get it. This is going to work out just fine!
11. Wow! Who is this interesting lady (fellow) who lives with me? She really knows how to cook, garden, walk, converse – kiss! I am the luckiest guy, aren’t I? She says the same thing, under her breath.
12. Suddenly realize, six months into retirement, that they are busier than when they were working. How did I have time to work? Family. Charity. Spouse. Travel. New activities. Losing weight. Sleeping well. Loving once again. Now this is the life!

Most of us are addicted to work. It must be the Calvinist upbringing we had as children in the fifties. It is incredibly difficult to stop working: for many it is nearly impossible. Surveys from the EBRI have shown for 20+ years that the #1 reason why people continue to work ‘after retirement’ is the sheer pleasure of work. Our generation was designed for work. The transition is quite difficult to make. Once it is made, we are good to go, but getting through that doorway is a challenge.

Your client may have a deep desire to stop working and get on with their retirement. They still have a devotion to duty. Whatever he or she does – sweeping floors or managing a multi-million dollar enterprise – they feel important. They will be, should be, sorely missed. Their experience is without value. The sooner they realize that, the better. The young pups are eager to take over at 1/3 the salary and make their own mark upon the floor.

Your client may be fully prepared emotionally, psychologically and financially for retirement. What about the spouse? She has designed her life around his absence. They are going to have to deal with this small matter of constancy of presence, aren’t they? How can I miss you when you won’t go away? She has her schedule, her friends, her sequence to the day. He is going to be a bull in a china shop, she fears. They will have to deal with this little issue.

Financially, we have done our work, as has the client. We have in place a comfortable retirement portfolio including a mix of cash value life insurance, annuities and IRA funds. Social Security, rental income, part time work will enhance the portfolio income. We feel certain they will make a go of it. Or do we? This column has made the point several times on the great risk we all face: longevity risk. It is a risk to which there are no firm, current answers. It is an evolving risk. We, like our client, must be adaptable to the future.

The old ways: modern portfolio theory, asset allocation, buy/hold – are more like dinosaurs. They have failed too many times during the past two decades to be reliable. Whether we admit this or not, it is a fact. We need another approach.

First, we need to acknowledge that each client is different, with different income needs.

Second, we have to design to their income needs, rather than the cookie cutter approach we have been trained to offer. It simply doesn’t work.

Third, we have to constantly increase our awareness of not only financial products and services, but lifestyle demands, health concerns and the absence of inflation.

Fourth, we may wish to spend more time listening than telling. Our clients have far more experience with their lives than we do; they are the guides, rather than you. Our role is to give ideas, theirs is to appraise and accept or deny.

Fifth, we will all, or most of us, live longer, healthier, happier, less costly lives than we have been led to believe.

Sixth, as we mature, we spend less. Get used to it. Those projections from ten or 20 years ago are nonsense.

Seventh, capital is a tool, it is a means to an end. It is one of many tools to ensure a comfortable retirement. It is neither omniscient nor omnivorous. We can and will live within our means.

Eighth, and most important, our health is our most important asset. With it we can do much as we wish. Without it, all the money in the world is useless (ask Steve Jobs).

We CAN enjoy a comfortable retirement. Just ask you (retired) client to show you how!