The Most Overlooked Flaw In Your Retirement Plan And How To Fix It

Suzy rings up another customer in a party supply store. Surrounded by bright, bouncing balloons celebrating everything from anniversaries to birthdays, Suzy scans a bag of blue plastic spoons while speaking to a friend. 

Leaning across the checkout counter between bouquets of mylar balloons, the friend gleefully asks, “Hey Suzy! Your birthday is coming up, isn’t it?” 

Reluctantly Suzy responds, “Yeah, it’s the big 6-6,” as she tosses a package of red party hats into a bag. 

Watching her ring up another customer, her friend pushes, “Isn’t it time for you to retire?”  Looking down, Suzy rings a 20-pack of napkins, and replies, “Retire? What would I do? If I didn’t keep working, I think I would just crumble.”

Suzy is not alone. Findings from a study conducted by the MIT AgeLab explored what people anticipate doing in retirement. The most often cited words used to describe life after work by younger Baby Boomers and Gen X’ers, such as relax, reflected the vanilla ambiguity of retirement brochure imagery. 

And therein is the flaw with today’s primary approach to retirement planning – goals-based planning. We are asked by retirement product and service providers to articulate our retirement objectives and then to build a financial plan to achieve them. The approach is not altogether incorrect, as it is incomplete. 

Goal-based planning is profoundly rational, as such it helps many economists sleep well at night, and is often the opening salvo between a financial professional and a client. The problem is that most of us are not that rational. The process is ideal for those who have their car’s next oil change already scheduled, arrive early at their doctor’s office for an annual physical, and have their kitchen spices labeled and arranged in alphabetical order. In sharp contrast, most of us are like Suzy, and, frankly, find the hyper-rational among us a bit odd.

Life before retirement may have been anticipated, but it was rarely the product of goals-based planning algorithms. Yet, how many of us are being asked to map out our retirement years – a full one-third or about 8,000 days, of our adult life? 

As John Lennon aptly observed, “life is what happens while you are busy making other plans.” We may have hoped to fall in love, but few of us planned it when it happened. How many of us ended up in the career we discussed with teachers in high school, or even with advisors in college? And, for many, where they live today may not have been where they thought they were going to be decades earlier. 

For many, if not most of us, life outcomes are often the product of stories that we subscribe to and plan around. Not tales of fiction, but larger social narratives that guide us and tell us what is important. Stories are taught to us by observing the lives of others and reinforced by schools, employers, government policy, movies, advertisers, and even retailers. Together these people and institutions cue us when and how to get a job, find a partner, purchase an eight-piece dish set, have children, buy a home, and retire. 

However, the story of what to do in retirement is less clear. Our parents provide a poor example because the context of their older adulthood is different than the realities of tomorrow’s retirement. Moreover, unlike previous life stages, there are far fewer stories to guide us in retirement. Every other life stage is celebrated and sold to us. However, after your own retirement party, the stories and celebrations run thin. And, that’s where Suzy, and many of us, begin to “crumble.”

We are often left with two incomplete, yet dominant and dueling, narratives of life in retirement. One story is filled with a life of leisure trekking golf courses, beaches, and bikeways. The other, far less attractive, storyline is checkered with illness and even disability. Life for the vast majority of us is in between.

Until creative storytellers catch up to envision, structure, and reinforce more practical and attractive narratives, we must craft our own retirement story. Rather than goal-based planning alone, we must consider story-based planning as a critical element of what I have dubbed as longevity planning.

How to begin your own retirement story? Here are three ways to start.

Identify the main characters in your story. Is it just you or do you have a partner? Are adult children an important part of your retirement story? If so, critically and realistically consider their own situations such as their finances, professional and personal demands, children, and where they live.

Imagine your retirement story’s arc. A story arc is what hangs your narrative together. No matter how alluring, grandchildren, golf, and gardening alone will not fill all the new found time of retirement. Moreover, there may be four different ‘retirements’ in retirement. And, unlike other life stages, each phase may come fast, without warning, and pose very different demands. How might you manage each? 

Consider retirement life extremes. For most people, a retirement story does not include winning megabucks, but it does imagine continuing the lifestyle you live today, maybe with a dream vacation thrown in now and then. Now consider the unforeseeable and unimaginable. An adult child, or grandchild, needs your help. You, or your partner, become ill, disabled…or worse. Tease out what is important to you, what you might want done, by whom, and even how.

Goals-based retirement planning makes the assumption that you know where you want to go and do. Most of us are like Suzy. We have no idea or only have a set of incomplete (often unrealistic) ideas about how we will live in retirement. 

Crafting a retirement story explains why we do certain things, helps us share and discuss with others what is important to us and why, and enables us to anticipate possible futures – both desired and undesired. Effective retirement planning certainly requires financial literacy, but perhaps equally important is starting out with a good story. Stay tuned for more tales on retirement storytelling.