The Smart Take:
Listen as Kevin discusses the book What Retirees Want (WRW) by world-famous “Age Wave” expert Ken Dychtwald, Ph.D.
Learn why your expectations of how long you’ll work will likely vary substantially from how long you’ll actually work and why this matters.
Hear Kevin discuss what traits make retired workers happy in their encore careers and relate several stories of True Wealth clients who have retired but returned to some form of work.
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Walter Storholt: Glad you’re with us for another edition of Retire Smarter. Walter Storholt with you alongside Kevin Kroskey. He is the President and Wealth Advisor at True Wealth Design. We’re online at www.truewealthdesign.com. Find past episodes, schedule a 15-minute call with an experienced advisor on the team. Everything you need, truewealthdesign.com is the place to go.
Kevin, good to be with you. Once again, looking forward to continuing our series about the book, “What Retirees Want”, and your takeaways, analysis, and picking a part of that book. But before that, just hope everything’s going well in your world.
Kevin Kroskey: Yeah. Everything’s great. the same M.O. for me. It’s work. It’s family and maybe a little bit of time for myself and my wife together. And then lather, rinse, repeat, which candidly being a bald man, I haven’t had to do it for a couple of decades.
Walter Storholt: Oh, poor guy.
Kevin Kroskey: Life is good. I can’t complain. So, I’m okay with the baldness. No sympathy needed.
Walter Storholt: It does open up lots of good opportunities to poke fun at yourself though. Doesn’t it?
Kevin Kroskey: Yes, it does.
Walter Storholt: Well, fantastic.
Well, we set the stage in our previous episode, the first one of the new year about this book that you’ve spent some time reading through, making your way through what retirees want and picking apart different parts of the takeaways and the ideas in this book. And we know some things you’re going to agree with. Some things you’ll like or might peak your interest to talk a little bit about. Some you’re going to disagree with and maybe explain some reasons why and I’m looking forward to today’s breakdown.
Kevin Kroskey: Yeah, you got it.
So, in the first episode we really just set the stage for more of a history of retirement. And one of the key takeaways I would say is that, really, the increasing wealth that we’ve had as a society and the people within it have experienced and related to it, the increasing longevity that we have has just really changed the amount of time that we have in retirement and what we can do with it. So, we have this new time affluence. And so, today we’re talking about work in retirement, which on the surface may sound a little bit contradictory, right? “What do you mean, work in retirement?” “I’ve retired. I’m not going to do that any longer,” but one of the really key themes in the book and it definitely is becoming increasingly, so I would say in general, but is about working in retirement.
People expecting to work in retirement, people that are working in retirement, and what they’re getting from it. The book goes into illustrating a few companies that actually have programs where it’s more of like a phased retirement approach, which definitely seems forward-thinking but definitely not commonplace at the same time in our society today. But the expecting to work in retirement, the book goes on to say that more and more people are expecting to work in retirement. And one of the things that I’ll take slight issue with is expectations are just that. It may not match actuality. A common thing that you’ll hear related to investing is, and I’m sure we’ve all heard this on the news about consumer sentiment. So, the University of Michigan will poll people about how they feel or the optimistic or pessimistic or what have you.
Rather than how they feel, I would say and what research on this has proven is what people actually do is more meaningful and may not match up. So, while the book talks about people that are still working are expecting to work more and work longer, candidly, EBRI or Employee Benefit Research Institute studies that measure both the expectations as well as the actualities consistently finds that, that candidly isn’t the case. And I’ll reference a few stats from a recent study and I intentionally pick pre-COVID just because that’s to make a drastic understatement. COVID has been a bit of a monkey wrench in all these sorts of stats and we’ll see how things get back to some sort of normality or not, post-COVID. In 2019, and this survey, in case anybody wants to take a look at it for themselves, it was EBRI’s retirement confidence survey or RCS for short.
And what they found was that 48% of retirees found that they left the workforce earlier than they planned. So, almost one in two retirees left the workforce earlier than they planned. So said, another way. Maybe you’re 60 and you’re at a point in life where you’re probably making more money than you did before. Maybe you’re in a pretty good spot at work and overall happiness and you’re thinking to yourself, “Hey, I’m in a good spot. I can’t keep doing this until 65 or maybe 70.” but who knows? But on average, that really doesn’t happen.
I’m curious. Well, so if about half of the people, while they’re working, think they’re going to work longer than they actually do, what do you think are some of the reasons why they don’t work as long as they think that they’re going to?
Walter Storholt: Some of the reasons why they don’t end up getting there?
Kevin Kroskey: Yes.
Walter Storholt: I think a lot of people have expectations before they actually do the math. Right? So, you maybe haven’t been motivated to actually run the numbers yet. And so, your expectation is just maybe worst-case scenario. And then once you actually run the math, you get more confidence and you can move away from that. You can move more toward the mean and further away from that extreme solution of the negative side.
Kevin Kroskey: Oh my gosh.
Can we do an egghead alert for you?
Speaker 3: Egghead alert.
Kevin Kroskey: You just used, [crosstalk].
Walter Storholt: I almost drop a reversion [crosstalk] to the mean mention there.
Kevin Kroskey: I’m having a positive influence on you, Walter, and I love it.
Walter Storholt: I got to pull out a Kevin phrase here.
Kevin Kroskey: You’re supposed to balance me. I don’t know if this is a good thing.
Walter Storholt: You’re bringing up the floor. You’re bringing up the floor, the intelligence of the show.
Kevin Kroskey: I prefer, raising the roof. That sounds more fun but you’re right. What you said is…I would say a third of it is right. So, there’s three broad categories why people have those expectations but it doesn’t hold true. And the one that you really just intubated was, “Hey, we can afford it. We didn’t realize it before but we’ve crossed the financial independence finish line. I’m truly working right now because I want to and not because I financially have to. And Hey, I just decided I’m not going to do it anymore for whatever reason.” So, that’s about a third of it.
Any guess on the other two-thirds?
Walter Storholt: I would imagine some people get forced into a change, right? We can’t ignore that when people start getting to that retirement age. They get either encouraged or forced into retirement, perhaps.
Kevin Kroskey: Yeah. And I think that’s a good way to put it. I haven’t thought of that, the forcing, but both of the other two reasons I’m going to share, I think you could put under that forcing umbrella to a certain degree. And the other two items… And all of these, whether they can afford it or the other two I’m going to mention are all about a third of the reasonings that people provide but a company change. Maybe the standard sort of downsizing or something like that. Maybe there’s a buyout or a merger and jobs are eliminated. I can think of one client specifically. He does pretty well. He’s a director-level position at a Fortune 500 company and he has a boss that has just really changed his satisfaction. And so, maybe that’s a company change and hopefully, that relationship improves or changes.
So, he gets more satisfaction. The company change, which could be forcing to a large degree or hardship is the other general category that the survey talks about. And this could be your own health, your spouse’s health and hopefully not the health of a child. That could be somewhat tragic. Or it could even be, and you see this increasingly, but people retiring because they want to take care of their parents, their elderly parents, to a certain degree. And certainly, women are much better creatures when it comes to this than us men. But call it a family circumstance or health, something along those lines. So, I guess you could say that’s a hardship in some fashion but hardship, company change and they can afford it are the three broad categories.
I started doing educational workshops and retirement planning back in 2008. And literally, I would review this research every year and I would talk about it and it literally hasn’t really moved. Again, we’ll see what happens post-COVID. We’re in a bit of a weird period but expectations are not the same thing as actuality. From a financial planning standpoint, one of the risks and caveats I’ll mention is that you think about the last few years of your work. Again, typically they are your highest-earning years and probably the highest saving years. Knock on wood, the kids are out on their own and financially independent. The mortgage is paid off and you’re socking away a lot in the 401K or 403B, maybe some additional outside of it in your joint account or trust account. Maybe even some Roth IRAs.
And if you’re banking on those high-earning, high savings years and thinking you can do it until you’re 65 or 70, well, you have to be careful there. I wouldn’t plan on an aggressive financial makeup strategy or catch-up strategy to become financially independent. It’s one of those things where it’s a fine line between present consumption and making sure you have enough for the rest of your life. But this stat about people thinking they’re going to work longer than they actually do has been quite consistent for decades now. So, while I think that’s incredibly important to remember. Again, I don’t think it completely invalidates what the book is talking about. I haven’t seen it mentioned in the book about actuality. I see it about more the consumer sentiment sort of survey about how long you’re going to be working.
But nonetheless, there were surveys and I think we can extract some good information about why people who did retire that are choosing to still work. Why are they doing it and what’s making them happy? And from our own experience with having more than 300 clients, I certainly have a lot of experience with people doing this to varying degrees and varying roles that all intertwine here. So, a few broad categories and this is one I’ve seen a fair amount of. Again, this is surveying retired workers on why are they continuing to work and how are they deriving their happiness? And the first one is returning to earlier career roles or passions. So, we have a lot of engineers that we take care of. And a lot of times, they start out as an engineer and they’re doing engineering work and technical work and then they progress up the career ladder. And now, they’re managing people and projects and maybe not doing the type of work that they were passionate about and brought them into that profession in the first place.
Well, the good thing is a lot of times those skills, they can go back to doing them. They can shed that additional responsibility that they didn’t like. Sometimes managing people Is an often sighted reason here as well. Not managing people tends to result in less stress and more satisfaction. And the engineers may go back and do some technical work and whether it’s as an employee or a contractor. I have a client that just finished writing a second book on lean manufacturing and he does a lot of speaking and some consulting. But those technical professions…an architect as well, an accountant that likes to just do a little bit of tax prep work at tax time as much as he prefers to do but not work the crazy 80 hours a week that he used to.
These are all common examples that are cited, both in the book and that I’ve seen in practice where people do want to stay engaged. the old unscientific way of saying about your brain, “If you don’t use it, you lose it,” sort of thing. I think all of that applies here. Certainly, the money doesn’t hurt but money isn’t the prime motivator. So, returning to those earlier career roles, things that you’re passionate about, not managing people, and having less stress. I have one client, I just love the story. I have to share it. He was in finance. He had a publicly-traded company. He was a Lockheed and he had a pretty high-stress job. Working on these big budgets for are these government programs and a pretty stressful position.
And now he’s working for the city, the local city, and what he would say is, “No, no, no. I don’t work there. I choose to spend my time there.”
Walter Storholt: Big difference.
Kevin Kroskey: Big difference. And obviously, he gets paid and there are some benefits and all that is great and gravy but it’s a very clear demarcation in his mind and mine about what work was and what it is now. People would call what he’s doing now work but compared to what he was doing before, he has really no stress and he is choosing to spend his time there. So, I think those are all reasons. Those are reasons cited in the book. Something else that is cited is really just giving back to organizations or to the profession. I would also call this mentorship. Candidly, I’m not overly familiar with different programs that may exist at some companies about this. You have a very experienced knowledge worker and they’ve accumulated all this information over the course of their career.
And at least in my third party view, it seems like a lot of these companies, it’s just, “Hey, if you’re not here full time and engaged, then you’re not here anymore.” And there’s probably some growth and improvement that could be done in keeping people engaged and having some sort of phased retirement but really, being high on the mentorship and on the knowledge transfer. But candidly, I just haven’t seen it. There are a few examples in the book but they seem to be a little bit more isolated.
What I will say in contrast to maybe what the book talks about…. Well, you get the sense and the feeling that all these baby boomers that are retiring in mass are really not going to retire. They’re going to have these encore careers and they’re going to change the world. And I think certainly some of them will. Again, we have north of 300 clients. We’ve had many of them that have retired and been retired for many years now. And we’re from the Midwest. We tend to be nice, pleasant, kind, and simple folk if I can stereotype. A lot of the ones that I’ve seen, they want to stay engaged. Sometimes it’s small fun jobs. If you could get that job at the golf course and you golf for free. I have a client that has a passion for plants and she calls it digging in the dirt. She likes to work at a nursery.
I have another that just likes to work a little bit of retail around the holidays just so she can get a discount on shopping and on her Christmas shopping, even though she doesn’t need it. It’s just who she is and she’s got that sense of frugality and wants to have a little bit of engagement. We have a lot of healthcare workers that will still do per diem work. They can go out and they can be a nurse on any given day and get paid to do it. We have several clients that were pretty high up and successful at companies where they have knowledge and relationships and they sit on boards today. They advise companies. I have a few actually that may be expert witnesses because of their deep expertise in their profession. So, it’s definitely wide-ranging. But again, at least in our client base and we have a pretty good experience with them overall and we have a fair amount of them but it doesn’t tend to be so world-changing and so purposeful that, “Hey, we’re going to go out and change the world.”
I will say that I think men, more than women, and I didn’t do the stats on this or anything but just anecdotally, I think men more than women will go back and do some work. Oftentimes, women tend to have better social circles and relationships more so than men, particularly outside of work. So, if you go back and think about Maslow’s hierarchy of needs, we have all those needs and work can go ahead and meet some of those needs, whether it’s security needs and having enough money and what have you and esteem needs. But if you can have those needs met but work isn’t part of the equation then I think work is less likely to be part of somebody’s retirement in my experience. I will say again, anecdotally, I’ve had a lot of clients say that they’re going to work in retirement and they don’t.
And that could be for a multitude of reasons but I think if I look back and think about the takeaways from this, the expectations about how long you’re going to work are important. Most people do not work as long as they think they’re going to work. It tends to be 3, 4 or 5 years shorter. I do think it’s going to continue to evolve and change. As we have increasing wealth, we have increasing longevity and we have this increasing time affluence. I think there’s going to be more opportunities for people to be involved in some way. And if you can do work that you’re truly passionate about and enjoy but still have the freedom to go ahead and experience your time affluence in ways that are meaningful to you and not be constrictive as it may have felt while you’re working full time, I do think it’s natural to expect that more and more people are going to be working. I just don’t see maybe necessarily a ton of encore careers to the extent that the authors convey in the book.
Walter Storholt: Interesting to hear that. It’s almost like it’s just the shift in focus away from a career in more to just something simpler, whether that be volunteer work or whether that be a job or like you said, just decreasing the roles and responsibilities. It just seems like there’s a refocusing of simplicity. And then there’s a wide variety between how that plays out from client to client.
Kevin Kroskey: Yeah.
Walter Storholt: Might not?
Kevin Kroskey: No, no. I agree. I always say that and I’ll say it again. We’re all snowflakes, right? We’re all individuals and everybody’s a little bit different and I think we’re different at different stages of our lives. And so, it’s a continual evolution. And I think that’s a good thing. If you’re stagnant, that might be a little bit more challenging as you age and things keep changing around you. So, to be dynamic is probably a good thing.
I think entrepreneurs and I think business owners are maybe a little bit more uniquely positioned to experience this while they’re working. You could think as a business owner, you could potentially hire some additional people and change your role so you can spend more time in those passion areas. Maybe more easily versus if you were a W2 employee at a company and didn’t have full autonomy over what the roles and responsibilities were like. It’s going to keep changing for sure. And I think the baby boomers, no doubt, will continue to make an impact. But I think increasing longevity, increasing wealth, technological changes, and all this are going to continue to impact how we’re going to live, not only our daily lives but certainly the time affluence throughout our retirement years.
Walter Storholt: It’s very interesting to dive deep into this conversation today, Kevin. Even though I’m a little bit away from retirement, it gets my wheels turning already thinking about what you would want to do to shape that, how you would spend that time, what it would look like to move away from the current career and do something a little bit different in retirement and what choices you would make and what are the different influences. I’m sure this gets the wheels turning for a lot of people as they listen to the show today.
Kevin Kroskey: What I would say is a pragmatic takeaway is it’s certainly good to have a plan. If you’re still working and you’re thinking about how long you’re going to work or you’re going to work an encore career, at least from a financial planning standpoint, I wouldn’t include that in your base case in your financial plan. I would assume no work but then if it is something that you do from a financial perspective, I would look at it more so as icing on the cake.
I had a case this week where he has been retired for a couple of years. He was fairly high up at Goodyear and a technical expert. And he got an offer to do a pretty interesting consulting gig for a tire company out of India. He’s let me know about what he thinks he’s going to make given how much time. And I’m like, “Hey, that’s great. That’s awesome.” You could just tell in his voice that he’s pretty jazzed up about it because he could see how he could help. He could use his noggin, as he would say. And certainly, the income doesn’t hurt but obviously, we need to be aware of that. Now we got to change his tax planning and income planning for the year. All good problems for sure but I guess if you’re still working and you’re thinking about how long you’re going to work, be pragmatic about it. Maybe be a little bit conservative and then maybe have plan B where you’re going to work a little bit longer or maybe have that encore career and some money attached to it.
Walter Storholt: Great perspective and way to think about it.
If this conversation today sparks something in your mind that you’d like to talk out a little bit more in a one-on-one fashion with an experienced advisor on the True Wealth Team, very easy to set that up. In fact, you can schedule a 15-minute introductory call by going to www.truewealthdesign.com and click on the, “Are we right for you,” button. Again, that is at www.truewealthdesign.com and we’ll link to that in the description of today’s show. You can also call (855) TWD-PLAN. (855) TWD-PLAN if you want to get in touch via the phone method as well.
Kevin, thanks for your guidance through the show today and the discussion about this book. Once again, it’s called, What Retirees Want, and we’re breaking it down over the course of several episodes here on Retire Smarter and some more good takeaways today. And we’ll look forward to chatting with you again on the next episode, Kevin.
Kevin Kroskey: Thanks, Walt.
Walter Storholt: All right, we appreciate it.
That’s Kevin Kroskey. I’m Walter Storholt. We’ll talk to you next time on Retire Smarter
Disclaimer: Information provided is for informational purposes only and does not constitute investment tax or legal advice. Information is obtained from sources that are deemed to be reliable but their accurateness and completeness cannot be guaranteed. All performance references historical and not an indication of future results. Benchmark indices are hypothetical and do not include any investment fees