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Retirement Planning > Saving for Retirement

4 Reasons Why Your Clients Can Never Really Retire, Part 2

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While it’s impossible to succeed at traditional retirement planning, it’s not impossible to make a financial plan. If the focus is on producing, rather than quitting (i.e. retirement), then there are four ways you can help your clients succeed financially.

1. Help your client define a central productive purpose.

The root cause of the failure of retirement planning is the desire to live a lifestyle rather than to pursue a central productive purpose in life. Retirement is often used as the default purpose, but it’s not a productive purpose. It’s more of a transition or a means to some other end. By focusing heavily on “retirement,” your client is forced into a position where he must define a lifestyle he wants to live, and then make goals to achieve that lifestyle. That’s entirely backwards. Your clients have to understand this, and so do you. Where did he get the idea for his “perfect lifestyle?” A book? A movie? His friends? You?

Unless the client defined a productive purpose, those lifestyle goals are always arbitrary. Instead of looking out into the world, the client must turn inward and engage in a process of introspection. Since this is a financial plan, the focus is on some kind of productive purpose. In short, the plan must define how the client will make money. To do this, he must choose a central productive purpose that will guide his entire life and allow him to define all of his other values. Once this is done, there is no need for an explicit retirement plan. There is no need to define a lifestyle, since the client’s lifestyle is determined by his central productive purpose. In other words, a client’s lifestyle, and thus future retirement (if applicable), will be determined by whatever the client chooses as his productive purpose.

For example, an artist will choose values that are required to become the kind of artist he wants to be. He may decide not to retire, ever. His plan includes provisions for emergency situations, and for times when his artwork doesn’t sell. He may also consider “retirement” as a last-ditch effort to survive and so he may accumulate a modest savings to support himself in his old age if he can no longer create salable artwork.

He may spend much of his time touring art shows. He may opt for a modest home so that most of his time can be spent painting rather than cleaning and maintaining a large home. In this sense, he may value a minimalist lifestyle because of his passion for art. His lifestyle isn’t an arbitrary mix of golfing, vacationing, work, and nightlife activities even though he could reasonably pursue any of these activities if they helped him achieve his central productive purpose.

Choosing this productive purpose is excruciatingly difficult. It must involve some type of action-statement that is a personal statement of productive action. For example, “My central purpose in life is to ____________.” The blank is filled in with an action word (i.e. write, sing, build, draw, research, teach, etc.) that describes some productive process.

Some examples:

“My central purpose in life is to teach financial planning.

“My central purpose in life is to write poetry.

“My central purpose in life is to compose music.

“My central purpose in life is to build bridges.

To determine his purpose, the client must first observe certain actions that stand out to him. He must decide what brings him extreme joy and happiness in life. Then, he must integrate his observations. Is he particularly good at writing? Does he enjoy, and is he good at, simplifying or explaining complex ideas? The former may lead him to be a writer, while the latter may lead him to be a teacher or instructor of some kind.

After doing some introspection to determine what he really enjoys, and after he has determined he has the skill necessary to actually be productive doing the things he enjoys, then he is ready to formulate an action statement similar to the examples above.

Forming that action statement is possibly the hardest part of the process because the action has to be personal. It cannot be generic. For example, “my central purpose in life is to be happy” is not a productive purpose. Everyone needs happiness in life, so this isn’t explicitly personal. Second, you’ll notice that a statement like this is a statement of being, not a statement of doing. Productivity is not a state of being. It is a state of doing. Making money is a process, not a static end that your client passively observes or experiences.

The final step in the process is for the client to test his ideas against reality and discover what careers his productive purpose leads him to. If a client chooses “compose music” as a productive purpose, then the client needs to explore careers related to this purpose. Maybe the client discovers that he is not good enough to compose salable pieces. Maybe he can produce salable pieces, but discovers that it is a long and arduous process and that he would rather teach music theory than be a professional composer for a living. Maybe your client discovers that he was entirely mistaken about his productive purpose, and that the joy he felt was more about the idea of composing music rather than actually doing it.

2. Help your client define goals that are connected to his central purpose.

Once your client has a productive purpose, you must help him develop goals that are consistent with this purpose. This will solve a lot of problems that are common in financial planning. For example, your client’s productive purpose determines his expenses. His expenses also determine how much he must save for various future goals. Nothing is arbitrary. If you’re doing this correctly, there’s no need for you to tell the client what he should and should not spend his money on.

Adjustments for inflation are made each year inasmuch as it affects him. In other words, he only needs to worry about the cost of being an artist, not the cost of being an architect. Being an artist implies certain obvious short-term goals like making sure that a certain amount of work gets done each week, month, and year. For a painter, this might mean accomplishing one or two paintings per year or it might mean finishing 12. His production goals, which are largely determined by his skill, ability, and how challenging the work is, will determine the cost of his supplies for the year.

Understanding this eliminates the need to come up with some short-term, arbitrary, inflation figure. The artist is intimately aware of the tools of his trade, how much they cost, and may even be aware of expected future costs. Each year, he can make adjustments to his budget with your help, if necessary.

For example, let’s assume that all of an artist’s supplies total $1,000 for the year. If the cost of his supplies increases throughout the year, or for the following year, then the appropriate adjustments need to be made. Many financial advisors assume an average inflation rate, published by the Department of Labor, for all individuals regardless of context. This is a mistake that gets applied to most clients’ budgets and becomes most apparent in a client’s projected future savings needs.

The Department of Labor explicitly states that:

“It is important to understand that the Bureau of Labor Statistics bases the market baskets and pricing procedures for the CPI-U and CPI-W populations on the experience of the relevant average household, not of any specific family or individual. It is unlikely that your experience will correspond precisely with either the national indexes or the indexes for specific cities or regions. ”

Because the BLS numbers don’t reflect any particular individual, a more precise method of figuring inflation for a client would be to figure out how inflation affects that particular client so that he does not underestimate or overestimate inflation as it applies to him.

His long-term savings plan is driven by his long-term goals. These long-term goals are also directed toward achieving his productive purpose in life, but do not contradict his short-term goals. They can also be adjusted for inflation using current price inflation as a guide, thus eliminating the need to rely on arbitrary inflation figures over the long-term.

As an example, let’s assume an artist has a short-term goal of producing 12 pieces of art this year. He sets related goals and calculates the cost of supplies accordingly. He also has a long-term goal of owning an art gallery. To do that, he figures he needs to raise a certain amount of money and must have a catalog of a certain number of pieces of artwork to sell in that gallery. Since the artist cannot know what the future cost of the gallery will be, he must rely on current prices for buildings as a guide and thus he uses current inflation as a guide for long-term savings. He must track real estate prices over time. Whatever the rising cost of real estate is, the artist must adjust his savings accordingly. If a building costs $100,000, and the value (i.e. the cost or the rate of inflation) rises 3 percent each year, then he must increase the contribution to his savings each year by the same percent.

His investments would then be hedged appropriately so that the artist is guaranteed to meet his goal of purchasing the gallery within a set time frame, but has the potential to meet that goal earlier than projected. Each successive goal may or may not become easier to meet depending on whether there is excess savings from meeting goals early or exceeding projected savings targets. Excess savings is, of course, a good thing as it allows a client to make more challenging future goals and achieve greater financial success.

3. Provide financial education that makes sense within the context of your client’s goals and purpose.

Your client’s investments should be consistent with his knowledge and central purpose. Clients should be taught how to invest, when appropriate. At the very least, your clients should have a basic understanding of how investing works and how it relates to their productive purposes. When investing is personal, and meaningful, clients are motivated to understand what they are invested in and how their investments work.

If the client has no desire to retire, then there is no rush to accumulate a specific amount of money by a certain, arbitrary, retirement age. Retirement, in this scenario, becomes a contingency plan in the event that the client is forced into retirement due to some unexpected life-event.

All aspects of financial planning are filtered through the client’s own purpose. Insurance, savings, investments, and budgeting all need to be taught according to your client’s need for these things. You must be well-versed in a wide range of subjects and only teach your client what is relevant to his life and productive purpose.

For example, a coffee shop owner may be best suited to investing in companies in the coffee industry. This doesn’t mean that the coffee shop owner doesn’t need a firm financial foundation of “safe money” to work from. Most people benefit from basic financial products like savings accounts and simple fixed interest investments, since they are very liquid and give the investor a lot of flexibility. Once a solid foundation has been built, however, part of that savings can be concentrated in longer-term investments that the client understands well.

If he is passionate about coffee, this will seem natural to him as an investment idea. He could learn an entirely different industry, but why? He is already familiar with his industry and has extensive knowledge about coffee growers, wholesalers, retailers, and even large-scale coffee shops. If the client is very knowledgeable about businesses tied to the coffee industry, he would have a very good idea of when to buy in, sell off, or hold his positions thereby decreasing the risk of loss substantially. Your job, as an adviser, would be to teach him how to apply principles of investing to his area of knowledge so that he can make money as an investor. Of course, if he is truly interested in other industries, teach him how to invest in those industries.

4. Encourage financial independence and personal self-responsibility.

Far too often, clients rely on a financial advisor to tell them what to do. As advisors, we call this “giving recommendations.” However, your client needs to take responsibility for his own financial affairs. Allowing your client to volunteer a few pieces of financial information and then sit passively while you construct a plan for him doesn’t help him at all.

According to the American Heritage Dictionary, the word “advisor” means:

1. One that advises, such as a person or firm that offers official or professional advice to clients.

2. An educator who advises students in academic and personal matters.

It logically follows that a financial advisor should focus on education in the same way that any other advisor would. The focus is on guiding the client and not on being an authoritarian-oriented advice-giver. Clients are responsible for going out into the real world and making a living. They are also responsible for making rational financial decisions.

Your job is to teach them what constitutes “rational” in the context of finances and financial planning. You can’t do that if you’re just telling your client what investments to buy or what he should and should not spend his money on. Most of your older clients already rely on either a corporate pension, Social Security or both as a major source of retirement income. Younger clients may not have that option. By rethinking the very concept of retirement, and teaching your clients how to make a real financial plan for their future, you will embolden them and encourage a sense of personal self-responsibility.

Even if your client retires from one career, the cold, hard truth is that he may not be able to simply quit working. The problem of not being able to predict death, and not knowing what long-term inflation and equity investment returns will be, is very real. In all likelihood, your client will be productive, in some capacity, until the day he dies. There’s nothing wrong with that unless your client sees productive work as undesirable. In that case, there’s not much you can do for him. Even traditional retirement planning will only give him false hope at best.

If your clients are allowed to develop a sense of entitlement, then they will not want to learn about financial planning. Eventually, they won’t even need you as an adviser since they will demand that their company or the government take care of them through Social Security or some other welfare program. It is in your best interest to reject the traditional concept of “retirement” in favor of a comprehensive approach to financial planning. Not only will your clients thank you for it, you will thank yourself.

David C. Lewis, RFC, is the founder of Twin Tier Financial, a financial planning and coaching company based in Raleigh, N.C. To read more articles by David, or if you have any questions about this article, please visit:

For more from David Lewis, see:

4 Reasons Why Your Clients Can Never Really Retire, Part 1

The Inconvenient Truth About Retirement Planning


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