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SIMON BROWN: I’m chatting now with Craig Lawrence, financial planner at BDO Wealth Advisors. Craig, appreciate the early morning time. Retirement – the recent piece you put out is on the next big story in personal finance. In many senses, the purpose of personal finance is ultimately retirement. There are a lot of moving parts but you’re saying it really is sort of the key point to it and in many cases we’re not quite ready.
CRAIG LAWRENCE: Yes. Good morning, Simon, yes. I think a good point. The point of financial planning is ultimately to get to a great retirement. But the idea of what that actually means is changing. It’s not merely about the money anymore. Data and research show that people are looking more to what happens to their identity. That loss of purpose. What do you do when you get up in the morning when you retire? What am I doing with my time?
These seem to be more pressing issues for retirees than just the money anymore.
SIMON BROWN: That’s actually a great point, because the old cliché is you sit on your stoep and watch the ocean or you play golf – and both of those sound like great fun for about the first month, perhaps. And then, I take your point, it’s the purpose, the meaning. Potentially you’re going to spend decades watching that ocean. You’re going to tire of it.
CRAIG LAWRENCE: Absolutely. So the data is showing that that honeymoon phase lasts for probably about six months or so. And then afterwards the questions start. It’s like: Is this all there is to it? Is this what I’m going to be doing for the rest of my life?
If you start asking those questions, you’re moving into an awareness of the next phase, which is this deep sense of loss. You’ve lost the identity. Lots of people in high-powered jobs don’t get asked anymore about their opinion, and that really is coming to bear in emotional issues with retirees.
Hopefully you catch this way before you retire and are not faced with it at some day, because it’s quite a sudden break – when you’ve been working for 30 or 40 years and one day you’re just sitting at home doing nothing.
SIMON BROWN: It comes to the point – and I’ve made it often — wealth advisors are becoming more and more [sort of] psychologists in many senses. To your point, it is more about that money than it is around having those conversations.
You needn’t just stare at the ocean; you need, I suppose, to realise it and engage. There’s the old cliché: ‘Make a plan’.
CRAIG LAWRENCE: Make a plan, absolutely. And the idea of the psychologist – be very careful about not going down the route and telling financial planners that they are psychologists. But the idea around financial planning, coaching, is probably decades old in South Africa already. It’s marrying traditional life coaching with financial planning.
So having these conversations is absolutely important – again, moving away from just the money. Money is important; you can’t retire without it. So we’re not saying, disregard that, but we’re seeing the effects of emotional instability in retirement being more detrimental to your health than things like obesity, drug abuse, alcoholism. It’s quite serious.
SIMON BROWN: Actually I hadn’t thought of that. It’s that sort of a sense of self-worth – or potentially lack thereof in this particular case – and is of course what matters. I always make the point that the key thing is that personal finance is personal, and retirement is going to be personal as well. This is not going to be a one-size-fits-all. Someone might want to tour the world. Another person might want to go and work for an NGO. You’ve got to find what works for you and for your partner in retirement at the same time.
CRAIG LAWRENCE: Yes. It’s been a problem, I think, with what we would probably term ‘institutionalised retirement’ where the company that you’re working for says, you’ve got to go at 60 or 65. There is no guidance around what you’re going to do afterwards. It’s that clean break. There’s no transition. That causes a lot of the problems.
So we’ve funded some excellent research done by the UCT Liberty Institute, where they’ve now purported to see the rise of a grey zone in our economy. The traditional plan [for] retirement planning was that you go into a learning phase and an earning phase – and then you retire.
What the data is showing is that there is a phase in between earning and retirement, where individuals are moving into a time of trial and error and reinvention. That’s what’s making the difference to successful retirement planning. It’s having the ability to do other things while creating those new career patterns for yourself as you lead into whatever that time is going to be. So it doesn’t have to be when someone tells you you’ve got to go at 65. You do it now on your own terms.
SIMON BROWN: Yes, I like that – trial and error, reinvention. It’s a completely new space for us. If your savings are good, you don’t have to worry about the money in retirement and it is just sort of casting around to see what’s going to grab your attention, what is going to work for you, and what sticks.
Again, it’s different for everyone, but you’ve got to sort of go through that process to have a fulfilling retirement.
CRAIG LAWRENCE: Yes, absolutely. The empirical data and even the anecdotal evidence suggest that this is why we consider it the next best thing. The next best thing in retirement planning is often the most neglected part.
SIMON BROWN: Yes.
CRAIG LAWRENCE: I think that there’s going to be a rise in this as the awareness increases. And, as you mentioned, financial planners are becoming a little more savvy in the coaching space. They’re going to [have to] build their skills to have these conversations with retirees.
Two things are probably going to happen. You need to have the skill set in the financial planning profession to help the retirees with these conversations because for traditional financial planners it’s not an area we naturally move towards.
SIMON BROWN: Yes. I get your point on that. Absolutely. But I like the concept. We have to do more than just play golf or stare at the ocean. I love the ocean, but even I would get bored with it at some point, perhaps.
Craig Lawrence, financial planner at BDO Wealth Advisors, I appreciate the early morning.
#Retirement #planning #money #meaning