Look Out, Retirement, the Boomers Are Coming

Nearly three out of four (72%) pre-retirees over the age of 50 say their ideal retirement will include work – often in new, more flexible and fulfilling ways, a study from Merrill Lynch finds.

The common thinking on retirement is that it’s a sedentary, fixed time of life, says Ken Dychtwald, CEO of Age Wave, which partnered with Merrill Lynch for the research, which asked people to describe their ideal retirement. “Work in Retirement: Myths and Motivations” had some surprising findings, with half (47%) of current retirees having worked or planning to work during their retirement years.

“Incredibly, three-quarters of Boomers said that continued work would be extremely important in their ideal retirement,” Dychtwald says.

But they didn’t intend to continue in the same career path. They redefined work altogether, Dychtwald tells PLANADVISER. Even before actually reaching retirement, they were envisioning new careers. It’s not surprising, he points out. After all, Baby Boomers famously have reinvented themselves, changing college majors with some frequency, changing spouses and religions. “They are far more likely to reinvent themselves again and again than previous generations,” Dychtwald observes.

More than half surveyed (60%) said they wanted to try something new, Dychtwald says, describing this as “absolutely stunning.” When his grandparents reached retirement age, they were not thinking of a new career, he says, but these days, “a bookkeeper somewhere is dreaming of opening a coffee shop. Someone else is thinking of being a teacher. A financial adviser might like to write a novel.” People no longer see retirement as the end of work, nor do they desire a leisured life.

Next surprise, Dychtwald said, is the career intermission. About half of working retirees (52%) said they wanted a break when they stopped working, for periods lasting anywhere from a few months to a few years. But it’s clear they are looking for a temporary respite. One respondent, he recalls, said her bucket list was empty after three years, and she was bored and wanted to get back in the game.

Interestingly, Dychtwald says, people over the age of 55 are more likely to be starting business and pursuing entrepreneur than younger people. They don’t simply want to set their own schedules. They have ideas. Retirement seems to be giving them the breathing room to launch new enterprises. 

Risk Takers

A possible reason is that when people reach this stage and their families are grown, they are more capable of taking on risk, says Cyndi Hutchins, director of financial gerontology for Bank of America Merrill Lynch.

Dychtwald acknowledges that people over the age of 55, who are not in the workforce, find that it can take twice as long to get hired. Those trying to create a new model may have a hard time, but there will be millions of people doing this. Millions of people are going to be treating retirement this way, he feels.

Hutchins agrees that Baby Boomers will help set this trend as trailblazers for a new way of living through retirement, and predicts a shift in mindset when employers start to see the value these employees can bring to the table in experience and new ideas, as well as what they can teach to younger generations in the workplace. “Employers will be more open to hiring these older workers,” she tells PLANADVISER. “You’re going to see this become more of a reality.”

The definition of success has changed, Dychtwald points out. Some years ago, retirement itself was the goal, and achieving it meant success. “But now the most successful people want to work longer,” he says, “and that is going to create change, too, as other people follow. It’s not because you need the money. The wealthier people are, the more they want to work in retirement.”

 One disturbing point emerged when people were asked if they were talking about these plans with a financial adviser, and a majority (85%) said they had not discussed a retirement career with an adviser. “That’s a mistake,” Dychtwald says. “How can you create a financial plan if you assume that they don’t want to work, but inside their mind they are dreaming up next career? This must become part of the conversation.”

Advisers must be able to help an individual put these pieces together holistically, Dychtwald says, drawing on the Merrill Lynch Clear program, for example, which addresses the interconnections of an individual’s priorities, such as health, home, family and finances. (See “Merrill Lynch Unveils Holistic Wellness Program.”) 

More Flavors

Citing the old “Saturday Night Live” comedy sketch where every customer’s order was translated into a cheeseburger, no matter the original request, Dychtwald says that era is over. “A just-the-numbers approach to financial services might have worked fine for previous generations in an earlier model of retirement that was plain vanilla,” he explains.

Financial professionals must be much more fluid to understand how to educate people and meet their needs, and they will have to take a wide view, holding conversations about the things that matter to clients, Dychtwald points out: “Boomers have diverse interests, challenges and goals.”

Hutchins agrees that the number is no longer the main point. “As a former financial adviser, we used to talk about retirement with clients, about accumulating as much money as you can,” she says. “Then at the end of the game, you put on a withdrawal rate and 4% would buy you 30 years of income in retirement.” But now the focus is on how you want your life to look in retirement, creating lifestyle goals, making sure the financial pieces are in place. The conversation is based on goals, not numbers.

The philosophy of work changes for people later in life, Dychtwald says, and can take on a different purpose. Work doesn’t have to be full-time, and most retirees did not want high-pressure work, five-day-a-week positions.

Education is the cement that can hold these new career plans together, Dychtwald says, and many retirees plan to continue learning. In fact, when the working retirees in the study were asked what advice they would give to people contemplating work in retirement, they said, “Be willing to try something new. Be willing to earn a little less, to do something you really enjoy.”

“Work in Retirement: Myths and Motivations Career Reinventions and The New Retirement Workscape,” which was completed in March 2014, was conducted in partnership with Age Wave and executed online by TNS. The survey included 7,078 respondents over the age of 25, broken down by generation: 720 Silent Generation (age 69 to 89), 1,781 Boomers (age 50 to 68), 517 Generation Xers (age 38 to 49), and 485 Millennials (age 25 to 37).

“Work in Retirement: Myths and Motivations” can be accessed here.