“Am I set for retirement?” the baby boomer client asked his financial advisor in their first meeting. “I’ve been writing checks for $3,000 a month ever since my CPA told me to.”
After making out these checks, however, the client had simply been putting them on his dresser. “My CPA calls me up and yells at me because I don’t send them in,” he confessed sheepishly. “But I have a cash business. What if we run short?”
Instead of scolding him for this behavior, the advisor asked a simple question: “What does retirement mean to you?”
“Nobody has ever asked me that,” the client mused. “I guess you go sit on a beach somewhere, and then you die.” After a pause to consider this, he said in amazement, “No wonder I’m not sending in the checks.”
To help this client let go of the notion that retirement meant death (no wonder so many boomers hate the word!), the advisor told him, “Retirement could mean doing what you want, when you want, with whom you want.”
Reframing the concept set the client free. Soon he was contributing $20,000 a month to his retirement accounts. “I thought I didn’t want to retire,” he told his advisor. “Now I can’t get there fast enough.”
This fortunate baby boomer–a client of Rick Kahler, president of Kahler Financial Group in Rapid City, South Dakota, who told me the story–recently retired, having quadrupled his retirement nest egg since that meeting.
Advisors who, like Kahler, succeed in helping clients come to grips with the future typically use a process similar to one I’ve advocated for years. The first rule is not to impose your own agenda; find out why clients are coming to you. Then take time to help them plumb their innermost longings so you understand the deeper needs and desires to be built on. Listen attentively, and mirror their fears and concerns as compassionately as you can. Clarify their goals and dreams in specific terms. Finally, use all your expertise and resources to brainstorm ways to help them meet as many of those goals and wishes as possible.
That’s how it should work. But the baby boom generation brings a unique mindset to the table (see “The Bell Tolls” in the February 2008 issue of IA). For instance, boomers feel “entitled with higher expectations of pleasure than any previous generation has known,” as Diane Miller, a principal of Miller Financial Planning in West Somerville, Massachusetts, told me; yet they are also “giving and sensitive to the poor. An interesting dichotomy.” These apparent contradictions help explain why it can take special sensitivity to help them handle their financial issues.
More then Money
“Retirement is about money and it’s about more than money,” says Helen Dennis, a specialist on “aging workforce” issues and co-author of Project Renewment: The First Retirement Model for Career Women (Scribner, 2008). “People are often pursuing what’s most meaningful for them. Some have a religious calling; others a calling to build houses for humanity; others want to influence the political horizon. Retirees today have more opportunities than at any other time in history.”
Given these possibilities, it may not take a fortune for some boomers to be happy. In fact, Kahler often reminds clients about a 2005 survey conducted by Time magazine which found that above the $50,000 annual income level there is no correlation between people’s income and their degree of happiness.
Annual retirement income of $50,000 (or $55,000, adjusting for inflation) may be fine for clients who have a modest lifestyle. However, all too many boomers are accustomed to living large.
“Many boomers are living hand to mouth,” Kahler says. “They don’t have any money, which makes it hard for the average planner. We typically don’t have the tools [or often the training, I might add] to help somebody who knows he ought to be saving but can’t save.”
But change is possible. Kahler cites the example of a boomer couple in their late 50s who were earning $350,000 a year but spending $400,000. At the outset, he says, they couldn’t even talk to each other about money. It took him a year, working in tandem with therapist and life coach Laura Longville, to help them break this vicious cycle.
“At our last meeting, they were amazed at the progress they made,” he says. “They’ll be maxing out their retirement plan soon, which means they can retire with $65,000 a year. They’ll still have to make some significant changes, but their future before this was living on Social Security. We’ve more than doubled their retirement income.”
Teaching Gratification Deferral
How can you inform boomer clients that if they hope to live comfortably in the future, they’ll need to earn more or spend dramatically less? Many boomers aren’t used to being told that they can’t get what they want, the way they want it. They’re likely to react with passive resistance, outright rebellion, panic, or shame.
To help them recognize and embrace the value of deferring gratification, I would encourage you to coach them on one of my core concepts: that superficially indulging ourselves makes it impossible to nourish our souls. You might begin a discussion by asking what one change your clients could make to begin treating themselves better on a deeper level.
If they’re open to curbing their consumption, there are several tactics you can recommend. I’m sure you’re familiar with the spending diary as a way to uncover areas of overspending. To make this tool more useful, ask clients to write down not just what they spend but how it made them feel, and see if it reveals anything about their choices, motivations, and new possibilities for saving.
Reviewing temptations to spend may also help. Do friends or neighbors push them to live beyond their means? Are there particular stores or restaurants where they tend to overexercise their credit cards? To the extent that they can avoid what I call “slippery places,” they may be able to rein in their spending without feeling too deprived.
Spenders who need outside help may benefit from the support of a more frugal friend who would be willing to act as a money mentor or spending coach. If you recommend Debtors Anonymous, don’t be surprised to hear a quick “no,” no matter how solid your rapport with the client. Some people are too ashamed to admit that they may be damaged in this way. You may have to think of other solutions, such as a financial recovery counselor. (Karen McCall and her associates at www.financialrecovery.com and Bari Tessler’s group at www.consciousbookkeeping.com are two valuable resources.)
Two more tips: Once you’ve developed guidelines for an overspending client, take care not to call it a budget–a word that free-living boomers mentally translate as “ball and chain.” Refer to it instead as a spending plan, or a spending, saving, and investing plan, or even a financial growth plan.
Perhaps it should go without saying, but be sure the targets you set for overspending boomers are realizable. As I mentioned in the first article in this two-part series (February 2008), a client who has saved little or nothing can be thrown into hopeless despair by the news that he needs to amass millions of dollars for retirement.
Shame on You
The worst strategy, I believe, is to blame clients for their inadequate savings or their excessive spending. Making people feel ashamed usually doesn’t motivate them to change. On the contrary, they tend to lock into self-reproach, flagellating themselves over and over instead of moving forward.
Ted Klontz, PhD, who specializes in coaching professionals and clients in the process of change, is bothered by “articles I read about how the majority of boomers have acted irresponsibly….[It's] a good example of taking a complex situation and making a simple solution.”
Klontz, president of Onsite Workshops in Cumberland Furnace, Tennessee, suggests that boomers face new rules and shouldn’t be blamed for operating under the old ones. He points out that when boomers started their professional careers, statistics suggested they would live only a few years in retirement. As average life expectancy has increased, so has the cost of health care–an annual retirement expense of tens of thousands of dollars that no one accurately predicted. Also, company-paid pensions were the mainstay of retirement planning when boomers began working. That secure income has largely gone by the boards, replaced by the risk of do-it-yourself investing. Finally, Social Security, once a reliable part of the “golden years,” has been unveiled as a Ponzi scheme that threatens to implode.
To suggest that baby boomers should have anticipated and planned for all of this seems pretty simplistic, Klontz concludes. He feels it’s more fair to say that boomers were blindsided by all this change in their later working years, and are now blamed for being stupid about it.
I wholeheartedly agree with Klontz’s view. If you approach your boomer clients without criticizing them for what they did or didn’t do, but instead use empathy and compassionate listening, you’ll find it much easier to get them on board with you.
Breaking Through Denial