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Howard Lutz, Senior Vice President at Intercontinental, was recently quoted in this Barron's article called "Think Retirement Is Only About Dollars and Cents? Think Again.", and wrote this blog post as a follow-up piece with his full thoughts:

One of the biggest mistakes people make when thinking about retirement is to simply put a number on it. For example, “When I get to $1,000,000, I can retire in comfort.” Or, “When we reach $5,000,000, we will be able transition into retirement.” Quantifying what it takes to retire is an important first step, but as we all know, there is so much more to it. When visiting with clients, we certainly need to help them determine the type of retirement they are hoping to achieve so the appropriate calculations and planning can be done – but the non-financial considerations are just as important. 

It’s actually quite surprising the number of recently retired clients that come back within the first 12 months and share with us how they are bored, depressed, or simply want to get back into the working world in some capacity. Retirement is a wonderful thing, and for many, it is the ultimate financial goal. However, the same attributes, ambition, and drive that often lead to a client’s ability to achieve financial success over the years are those same characteristics that lead them to experience feelings of boredom and incompleteness after the initial euphoria of retirement sets in. So when we really challenge clients to visualize and articulate what they want out of retirement, it can be transformational. 

To help our clients understand that it’s not just about money, we regularly hold conversations to discuss the non-financial side of retirement, including their goals, aspirations, and plans for how they’ll spend their retirement years. All of the advisors at Intercontinental are well positioned to lead these conversations because we can help illustrate the power of proper financial planning. Once we show a client it is possible for them to reach their goals, we are able to really dig into the “why”. Why do they want to retire? Why do they want to travel? Why do they want a slower pace? Why do they want to spend more time with the children and grandchildren? Why do they want to volunteer more? Every client has their own answer to these types of questions, and the answer itself is not necessarily important to the overall process. The fact they have an answer is what really matters. Being able to answer the “why” serves as a powerful motivator to work towards and ultimately enjoy a more robust and rewarding retirement.

Although retirement conversations are more frequent the closer a client gets to reaching this key milestone, there is also tremendous benefit in starting these conversations much earlier. If we really stop to think about it, retirement conversations should start occurring while someone is starting their first job that offers a 401(k). As crazy as it sounds to be talking about retirement with early career professionals in their twenties and thirties, this is actually the most impactful time due to the power of compounding interest and the long-term investment horizon. As advisors specializing in multigenerational planning, it’s common for existing clients to ask us to speak with their young adult children who are trying to make their 401(k) investment selections, or whether or not to participate in their firm’s stock ownership tract.

Whether the retirement conversations start early or happen later in life, framing the discussion around “why” is still one of the most influential approaches. It really gets clients thinking well beyond the numbers, and at the end of the day, most people are influenced by emotions not numbers. If anything, the answer to the “why” evolves over the years, and the simple fact that it does change just further illustrates the impact of knowing what’s really behind a goal.

I’d like to provide a real-life example of a radical difference that a couple discovered they had by going through this process, and this one involves a blind reliance on family inheritance in a family of five. The husband and wife are both in their late forties and their three children range in age from 8 to 16. The wife is a successful professional and comes from a wealthy family with significant ranchland that has been parceled off to various family members over the years. Although she has never really been sure to what magnitude the family wealth entails, she has always lived a life, both as an adolescent and as a mother, where there were never constraints on financial capacity.

The husband, also a successful professional, works for his family’s small business. He also comes from a family of substantial wealth, and while he has no idea of the scope, he too has enjoyed a life with considerable financial support over the years. It was never necessarily needed support, but more of a parent showering generosity on their children. To put it in perspective, the generosity included things like having their mortgage paid off one Christmas.

Based on their upbringing and wealthy families, it’s easy to understand why neither the husband nor wife thought much about their financial future. The financial generosity and assumed inheritance were always in the back of their mind. To put it simply, the husband and wife’s income met all of their current needs and they very much spent money in the moment without much thought for the future. So much so that the couple was not actively saving for retirement nor the children’s college education.

Through an initial discovery meeting, it quickly became apparent that anything related to their long-term financial needs and goals were going to be addressed by their unknown inheritance, at least in their minds. But that’s where their thinking began to diverge. As we discussed things like retirement and saving for college, we kept refocusing on the “why.” Why is retirement important? Why is a college education important for their children? These seem like basic questions that would generate simple responses, but focusing on the “why” served it’s purpose and really got the couple thinking. As the communication opened and the conversation reached new depths, we were able to help them reflect and give serious consideration to what would happen if the inheritance did not materialize for whatever reason.

The wife had a straightforward solution to fund their future needs: they would simply sell their part of the family’s ranch. This yet-to-be and assumed inherited asset undoubtedly had value, but the whole concept of timing, illiquidity, and a number of other considerations had not been taken into account. She had enjoyed the family ranch while growing up and while raising their children, but to her this was always going to be something they would sell down the road and that would help them meet their long-term financial needs. It would allow them to spend their retirement years seeing the world and traveling as often as they could.

The husband, on the other hand, said he had always looked forward to the retirement years living on that same inherited family ranch that the wife planned to sell. In his mind, they really didn’t need much in the way of financial resources. They would live a simple life of retirement enjoying the slower pace on the ranch. Surely his parents would pay for the grandchildren’s college expenses just like they had paid off their mortgage years earlier. They were known for their generosity and thoughtfulness, and they certainly loved the grandkids. Truth be told, the husband was actively trying to figure out how to approach the subject with his parents since their oldest child was only a few years from college. 

Thankfully, this is not a story of financial demise, but rather a story of how open communication and proper planning can transform an assumed inheritance into life changing multi-generational wealth. Neither saw the need to save for the future because of the assumed inheritance and generous parents, but the radically different plans to approach retirement could have created significant issues for the couple. Through a series of planning sessions and exploration of the “why”, we were able to help the couple envision a future where their three children eventually received an inheritance of their own. 

Instead of simply relying on a future inheritance to fund their own retirement, the couple was able to see the lasting power and benefit of saving for retirement themselves. This would open the door for their children to receive an inheritance as well, and this proved to be just the catalyst needed for the couple. It was important for the legacy of both of their families to live on and to have the same profound impact on the next generation. In addition, helping the couples talk through their retirement goals and establishing a financial plan to help them start saving themselves enabled them to see a future that included both travel and ranch living.  

If you feel like your family could benefit from a conversation like this, please do not hesitate to reach out

In addition, please read our recent Special Report on “Navigating the Complexities of Family Wealth Conversations” for more insights on these topics.

Howard Lutz
Senior Vice President at Intercontinental Wealth Advisors