From the September 2007 issue of Research Magazine • Subscribe!

Retirement Well-Being

You've seen the advertisements.

They show baby boomer couples planning for the "new retirement"-- energetic, youthful, purposeful. Retirement advertisements are obviously about much more than money. They acknowledge that boomers seem intent on destroying all the old notions about retirement. They're poised to break the mold, and create an entirely new stage of life.

And in the ads, who do these boomers rely upon to help create this new retirement life stage? Their financial advisor, of course! When advisors are portrayed, they're not just investment gurus, but wise friends. Not just financial wizards, but life coaches.

These media messages create expectations in the minds of clients that the financial planning relationship can be more than they might have thought. That it can be holistic, or values-based, or client-centered. But as an advisor, how do you actually pull that off?

Imagine you're meeting with a client, and the planning conversation turns from their retirement numbers to their retirement life -- what approach do you take? While you have plenty of theories, models, tools and techniques for the hard side of financial planning, what about the soft side? Are you left just winging it, based on your own beliefs and experience? Or is there actually a structure, a track that you can follow for helping them plan the non-financial aspects of retirement as well?

John Nelson, co-author with Richard Bolles of What Color Is Your Parachute? For Retirement, thinks that he has the answer. He calls it the Retirement Well-Being Model, and believes that it can revolutionize the retirement planning process for financial advisors and their clients (www.RetirementWellBeing.com).

After almost two decades as a pension consultant, Nelson spent the last four years as a PhD student at the University of Wisconsin, researching and developing the model. Along the way, he investigated the newest thinking from the disciplines you'd expect, like finance. But he also delved into the latest breakthroughs from fields as diverse as psychology and geography.

Nelson poses two important questions and adds his thoughts: "What are the best ways to prepare for the second half of life? How can you plan to optimize it once you get there? Medical researchers, psychologists and sociologists have been researching these questions just as rigorously as economists and financial planners. And what they've discovered has profound implications for financial planning. The purpose of the Retirement Well-Being model is to integrate all this knowledge -- and all these parts of life -- into the planning process."

Health, Prosperity and HappinessWhen pre-retirees talk about their greatest hopes and fears, Nelson says they typically mention their money and their health -- and also how they plan to seek happiness in a new stage of life. These fundamental human goals come together in the definition of well-being, which includes prosperity, health and happiness. He also observed that pre-retirees can increase their chances of getting what they want by actually planning for all three dimensions of well-being, instead of just one. His planning approach integrates all three, and provides a track for advisors and clients to follow.

Nelson points out that valid non-financial tools already exist. "But the common idea that there is a hard side and a soft side to planning is false," Nelson asserts. "The only thing soft about the bio-medical and psycho-social domains is the financial world's understanding and use of them. It's time to integrate these forms of scientific knowledge into the retirement planning process."

Nelson says a tool no advisor should be without is the Real Age test, available free at www.RealAge.com. Based on decades of research, the test indicates whether someone's biological age is younger or older than their calendar age, and by how much. "Suppose you have a client who is biologically five years older than their calendar age. Is it realistic for them -- and for you -- to assume they will be healthy enough to work to age 67, when their body at that point could be more like that of a 72 year-old? On the other hand, if that client's Real Age was five years younger than their calendar age, working later might be a realistic assumption. If you're not using these kinds of tools, you're planning in the dark."

Beyond the Parachute for Retirement book, Nelson's Retirement Well-Being Model is also being incorporated into retirement education programs. It was used to structure the retirement readiness project for the federal government workforce, and is being adopted by corporate and non-profit employers as well. A nationwide survey using Nelson's three dimensions was recently conducted by Matthew Greenwald & Associates, the research firm behind the annual Retirement Confidence Survey. And an online assessment based on the model will soon be available from the International Foundation for Retirement Education, at www.InFRE.org. InFRE will be making the planning tool available to organizations, financial advisors and the general public.

Nelson cites two primary reasons for creating the model, and for helping to identify and build the practical tools for implementing it. First, he notes that new disciplines gain credibility when they adopt a conceptual foundation. For example, accounting needed the income statement and balance sheet; portfolio management needed Modern Portfolio Theory; financial planning needed the six-step process. He recognized that retirement planning and education needed a conceptual foundation, too.

"Financial professionals have done a great job of figuring out what retirement planning is in the narrow sense, from their own perspective. But we've never defined retirement planning in the broader sense -- from the individual's perspective. That's not some esoteric question, but a very practical one. Whether your planning tool is on the Internet or on the back of an envelope, you need to know what the parts are."

Nelson's second motivation was to make retirement planning more attractive and engaging for the vast majority of people. While some pre-retirees like financial planning, many avoid it as long as possible. "By having a model that invites people to begin planning in the area of their greatest interest and energy, we're not just singing the same old financial song. Clients may want to begin by looking at the best way to access medical care, or where to build social networks outside of the workplace, or how to use their skills and strengths in a leisure pursuit or retirement job. It doesn't matter where they begin. By using the model, they end up addressing all of the areas, including financial."

If Nelson is correct, then the Retirement Well Being Model may be just the track to follow when that client conversation strays from the comfortable nuts and bolts of financial planning. What Color Is Your Parachute? For Retirement provides a practical approach, with pen and paper exercises for each of the planning areas. However, with online planning tools becoming the norm, Nelson says in the not-too-distant future, he sees clients completing their Retirement Well-Being exercises online and bringing them along to meetings with their financial advisors. "For the client, it will be just like providing their brokerage statements or tax returns for review and conversation -- it's all essential information."

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Marie Swift is the president of Impact Communications, a marketing and communications firm for independent advisors; see www.impactcommunications.org.

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