What is retirement? In simple terms, it means a voluntary act of leaving one’s job or to stop working. But the world is changing. An increasing number of studies, both Indian and international, have revealed that people are most likely to work post retirement.
A whitepaper by Stanford Center on Longevity survey shows that retirement today often involves taking up a second career, working part time or volunteering. “Today’s retirees are defining retirement in countless new ways. This shift requires that advisers pivot their approaches to incorporate clients’ changing expectations for their retirement years.”
Rajesh Hattangady of Thiink says, “Many of our clients have told us that they would prefer to continue working post-retirement. They feel that engaging in some activity will be more rewarding.”
One reason retirement is taking on so many forms is that people have many more years to explore and enjoy. A report published by United Nations titled ‘UN World Population Prospects’ says that India’s elderly population is projected to rise by 19% in 2050. It’s no surprise then that retirees expect to remain active and pursue new goals. Instead of stopping work altogether, they are planning retirements in which they might work, take career breaks, volunteer and are willing to try different things.
Just as they are pursuing individualized retirement goals, clients today are seeking customized financial planning that reflects their own specific circumstances. As a result, financial advisers have an opportunity to take on an increasingly valuable role as longevity strategists, creating portfolios that can meet both growth and income needs during clients’ long, active lives.
Longevity gives advisers new opportunities
Suresh Sadagopan of Ladder7 Advisories says, “Earlier, improvement in life expectancy was not a concern. But with changing times, it has become essential to look into the matter of increase in elderly population. This creates a demand for our services.”
More than 90% of people say that it isn’t enough to simply put aside money for retirement, shows Stanford Center on Longevity survey. Clients want a more personalized and specific plan that goes beyond traditional retirement planning.
Many financial advisers, however, focus on a target number that clients need to accumulate without taking time to assess each individual’s spending needs, finds the whitepaper.
Rather than focusing solely on accumulation, advisers should be having conversations with clients about such things as professional development, lifestyle interests and managing health and possible chronic illness. Advisers who have these conversations will gain a much better estimate of a client’s spending needs—and will then be able to develop a retirement plan that suits her situation.
Advisers have to focus not only on accumulation strategy but also educating clients on a spending strategy.
This dynamic demands that financial advisers take on a new role as longevity advisers. Advisers who embrace this role have the deepest, broadest life-planning conversations with their clients and offer the widest range of product solutions.
Also, emergence of nuclear family system has led to breaking down of the joint family system in India. Now, people are aware that post-retirement, one may not live with their children or get a significant monetary contribution from them. Thus, the challenge is to ensure that the elderly population manage their expenses independently.
“We have a few clients who do not stay with their parents. Also, we have seen that the elderly are managing their expenses on their own. With the increasing number of old-age people living alone, not all are able to manage their expenses. They fall short of savings. Thus, retirement planning should be a priority for any individual,” says Nikhil Kothari of Etica Wealth Management.
The combination of longer life expectancies and retirees willing to work or adopting retirement in different style is creating a demand for customized financial planning. These shifts present advisors with an opportunity to play an increasingly valuable role: They can help clients shift from building wealth to developing an individualized spending plan that works for every phase of their lives and supports the lifestyle they plan to enjoy.
Source: Whitepaper on ‘Balancing the Need for Growth and Income in Retirement’ by Stanford Center on Longevity, ‘UN World Population Prospects’