The following content originally appeared in The Financial Times column Financial Advisor IQ on April 24, 2015.
"Show Clients How Retirement Will Touch Their Families"
This week we interviewed Lauren Klein, president of Klein Financial Advisors, a fee-only firm in Orange County, Calif. Klein tells how a client’s family relationships caused him to rethink his retirement plan.
A few years ago, I met with a couple who wanted to know if they were ready for retirement. The husband was in his early seventies and still working at a job he enjoyed. His wife, who was a few years younger, had already retired from her teaching career. She was using her retirement to explore her long-time dream of becoming an artist and had rented a studio in town where she spent most days painting.
I always ask my new clients about the important relationships in their lives. Over the years I’ve learned these relationships often have a major impact on what a person’s retirement looks like. I’ve had clients who want to spend their golden years traveling the world with friends or their partner, and others who want to spend every minute possible with their grandchildren.
In this case, I learned the couple had very complicated family relationships. One daughter was going through a divorce, and they were helping her with legal fees and some expenses while she figured out what her post-divorce life would look like. Another daughter, in her early twenties, was bipolar. She lived at home and was underemployed, partially because she still was going in for treatment regularly. And their son was living in a condo they owned, paying them rent at well below market price.
Although the couple had solid savings, when I looked at the whole picture — the wife’s art studio, the children they were still supporting and their own immediate needs — it became clear that something would have to give. The situation reminded me of the old Weight Watchers slogan: something about being able to “eat anything you want, but not everything.” I told them that to retire and support themselves comfortably, they would probably need to take some concrete steps, including moving the wife’s art studio into their home, raising their son’s rent and helping their divorcing daughter find another way to cover her expenses.
The couple left my office with a list of things they needed to do before the husband retired. But the next time I met with them, they told me they’d made an entirely different decision. The husband opted to keep working for now. They told me they’d talked it over, and supporting their children was far more important to them than retiring just now. Retirement in the abstract had been appealing — but when they actually considered the real-world, practical trade-offs they’d have to make, they decided it wasn’t worth it for the husband to stop working.
This was a few years ago and he’s still working, though he and his wife have made a few strides toward retirement. She’s downsized her art studio, and they’ve begun having some difficult conversations with their children. They’ll get there; they’re just on a slower track.
This situation was a lesson for me in how important it is to consider how clients’ retirement doesn’t affect just them and their spouse, but their whole network of relationships. It’s so important for us as advisors to walk our clients through what post-retirement life will look like, not just financially but emotionally as well.
That’s often something people haven’t given enough thought to. Either they’re focused on their day-to-day worries, or they think about retiring only in terms of how much money they’ll have. As advisors, we need to remind them of the other concerns they’ll face too. That’s the best way to help clients prepare for a retirement that suits them.