How employers can help employees prepare for retirement
As director of creative campaigns for Invesco Consulting, Lisa Kueng is the developer of the company’s “The New Retirementality” workshop and co-author of the book, “Picture Your Prosperity: Smart Money Moves to Turn Your Vision into Reality.” She recently shared her perspectives on helping employees ramp up their efforts to prepare for retirement by helping them picture their retirement, and not by overwhelming them with numbers.
Employee Benefit News: When do most people start thinking about retirement?
Lisa Kueng: The Federal Reserve did a comprehensive study on this issue a couple of years ago and said people start to think about retirement after age 60 the most intently. That’s when their answer changes from, “I think about it a fair amount” to “I think about it a lot.” That means most people don’t prepare for retirement very far in advance, and many are not thinking about it at all. Our view is that few people have a clear vision for what retirement looks like. Typically when we start a conversation about retirement it’s all about how much have you saved and how much do you think you’re going to need, and so on. It’s all about numbers, not about what will you do.
EBN: Does the fact that there is so much emphasis on numbers cause people to avoid the topic because they don’t want to think about the implications — that they’ll probably need to tighten their belts and save more?
Kueng: It could certainly be the case, but it’s hard to know. We like to step back and look at the origins of retirement and how it has shifted over time. It got established in 1935 at the height of the Great Depression when the retirement age was established at age 65 with the advent of the Social Security system. The concept was, “This is the age at which you step out of the workforce and into this new phase of life.” But with the life expectancy then at 63, it wasn’t a very generous retirement — negative two years.
EBN: Things have changed a lot since then.
Kueng: Yes, people can retire earlier— at 62, although with reduced benefits —
but the average lifespan keeps expanding. Now it’s around 78. So now if you retire at 62, you have an average of 16 years of retirement. [It’s a] big chunk of time that was never anticipated when Congress created the Social Security system. But we have still been conditioned to think that when you reach the age you can afford to retire, you’ve reached a finish line and you pull off the road.
EBN: Is that a problem?
Kueng: Well, when we talk with investors about they think they’re going to be doing, we hear things like, “We’re going to golf, spend time with grandkids, go to Denny’s for the early bird special.” But how much time can you really fill with leisure activity? We really weren’t necessarily intended to be creatures of complete leisure. A lot of people find that doesn’t lead to complete happiness.
EBN: Let’s get back to the people who are too young to visualize retirement, and who therefore are probably not doing all they should to prepare financially. How do you connect with them?
Kueng: One of the things we do in our workshops with plan participants approaching retirement is give them a deck of cards of images — things like a beautiful mountain lake or a little boy holding an airplane. People interpret these images any way they want. The little boy could make them think about grandkids or it might mean travel. We ask people to pick three cards that represent something about what they perceive their life will be about in retirement, and work with a partner, a spouse or a significant other, and talk about what that picture means to them, and what they see themselves doing.
EBN: What’s the point of the exercise?
Kueng: If you picture retirement as years are full of nothing but sitting on the front porch and golfing and not having any real drive — not having something to get up for—it’s tough to get motivated to figure out how you’re going to pay for it.
EBN: Do you mainly work with people close to retirement?
Kueng: Not always. I remember a couple recently at a workshop. They were young, newly married, early thirties, and far away from retirement. But they could recognize the benefit. After this exercise, the couple came up to me and said even though they have a long way to retirement, they found this incredibly meaningful because it’s helping them to think through what’s important in their lives now. Most people don’t take the time to sit back and think what’s really important. Simple tools like the cards spark that conversation.
EBN: What kind of feedback are you getting from plan sponsors?
Kueng: What we’re hearing is that they recognize that employees have different needs and aspirations, that there is no one-size-fits-all solution. They want their employees to think through what they want to do. Also, the reporting systems that retirement plan record-keepers have can help sponsors track how employees are progressing toward having a successful retirement outcome. They can also decide if helping employees visualize their retirement helps.
EBN: Is it possible for the visualization to be too successful? Do employees ever focus more on life after work, instead of what they need to do in their jobs today?
Kueng: The example of the young couple shows how people just get more excited and motivated in general when they figure out what’s really important in their lives and get some focus. Getting them focused on their goals and priorities can make them even more committed to their job so they can achieve them.
EBN: Your program doesn’t just deal with visualizing retirement, right?
Kueng: No. There’s a lot of science around successful aging, and we have part of one of our programs that we call the “vitamin Cs.” These are elements to successful aging and if you can pay attention to all of them and make them present in your life to some degree, both when you’re still working and also when you’re retired, they help kind of anchor you.
The first “vitamin C” is connectivity: social connectivity, family, friends, etc. The second one is challenge — often a physical challenge and keeping active. The third is curiosity: being stimulated about something. It could be going back to school or Sudoku puzzles. The fourth is maintaining creativity in life, like art or music, or being a gardener, collecting Civil War memorabilia — anything that stimulates that part of your brain. The last one is charity and giving back.
EBN: As you said, this sure isn’t about just thinking about numbers.
Kueng: That’s right; these are aspects of life that really help people — not just older ones — as they move into different phases of life. Once you get that in place, the idea of saving for it, financing it, maybe making some different decisions now about what you’re doing with discretionary income, starts to look different because you’ve got a purpose now. You’ve got a vision and a motivation for where you’re going. It’s beginning with the end in mind.