A surgeon that Anne Rorapauch knows retired some years back and quickly became a “lost soul.”
Not satisfied with retirement, he returned to work, on a non-surgical basis, at the same group practice where he had worked before.
“Now, he sees patients, does evaluations, makes referrals and follows progress, and life is meaningful again,” says Rorapauch, a financial planner and tax consultant at Insurance Group One Agencies, Inc., Columbus, Ohio.
Stories like that are becoming more common for financial professionals as increasing numbers of baby boomers approach, or move into, retirement.
Whether due to good physical health, low savings, boredom or need for adventure, planners are seeing more and more boomers looking for ways to phase into retirement via reduced, altered or new types of work. In response, financial advisors are starting to look at how to help with the financial aspects of that.
“Sometimes, we don’t think about the financial aspects of major life events,” points out Michael Sullivan, president of 50-Plus Communications Consulting, Charlotte, N.C. But advisors should, he says, because having a good financial plan helps make the goal possible.
Advisors also should jump-start the discussion, he says. “Ask the client, ‘What do you want to do in retirement–in the first 5 years, the next 5 years, and so on?’”
Breaking down the time horizon often brings to light the fact that the boomer actually would prefer to move into retirement in steps, Sullivan says. Knowing this, the advisor then can offer some ideas on how to make that happen.
“Some clients may say, ‘Hey, I’ll never be able to retire. So, what can I do?’” Sullivan continues. “That can open up the phased-retirement discussion.”
Boomers’ needs and preferences are not the only things fueling phased retirement. Employers and benefits insurers are getting on board, too, says Jim Rathburn, vice president-business development at ING Re, Minneapolis. For instance, some employers have begun exploring how benefits might change to accommodate phased retirement.
Many carriers have not yet undertaken thorough reviews, he allows, but the likelihood is that this will change in time, as the workforce changes. The U.S. Department of Labor, he notes, is predicting that the percentage of workers over age 55 will increase from 14.3% of the working population in 2002 to 19.1% by 2012.
Boomers are facing a much different employment market than they did when first entering the workforce in the 1960s and 1970s, points out Rorapauch. “Back then, many employers were eager for older workers to take early retirement, so the companies could make room for the boomers–who were just starting to work.”
But now, she says, “there is no great swell of workers” behind the boomers. So, the employers increasingly are going to look to the boomers to work longer. Helping this along is the fact that many boomers have greater health and energy than did their same-aged forebears, she adds.
As boomers age, there will be more and more calls for part-time work and reduced hours, predicts ING’s Rathburn, indicating that discussions already are beginning to circulate in the insurance industry on how employee benefits might be changed to accommodate this.
One change that’s getting some attention is relaxation of the “actively at work” definition for group life and accident insurance, Rathburn says. This will force a re-thinking of group life pricing and reduced minimum-hours requirements, he predicts.
Underwriting is being re-examined, too, with an eye to mortality improvements, he says, noting that boomers are generally healthier than previous older worker groups.
Also, says Rathburn, carriers may face increasing pressure to make exceptions when evaluating worker populations. Traditional underwriting generally calls for no more than 10% of the volume to be constituted in retiree coverage, Rathburn explains.
But today and going forward, there will be an increased number of retirees as a percentage of total volume. “Carriers will have to be both creative and prudent in designing benefit options,” he concludes.
But, despite the good health that many boomers enjoy, Rathburn notes that having more older people working may also result in a rise in accidental death rates for the over age 65 segment. Insurers will need to study the impact of this, too, he says.
These are not forecasts, he emphasizes, but are likely changes insurers will need to evaluate.
Meanwhile, advisors need to sharpen their skills in discussing what phased retirement might be like for clients and how it could work, say advisors.
Rorapauch says she opens the discussion by recognizing that “it is a transition.”
Then, she counsels boomer clients to look carefully at what their income and expenses will be. “This is very basic. I ask them to think of the budget they would like to have, and at a bare-bones budget.”
She also impresses on clients that they should expect to go through a period of acclimating to retirement. “Then, I ask, how do you plan to spend your time, if you are no longer employed?”