RS NOTE: Although I wrote this article for financial advisors, it can also be used by individuals to plan for the non-financial aspects of retirement- the physical, mental, social, and spiritual questions and concerns we have during the transition into retirement.
A recent study from the Institute for the Future (IFTF) titled The American Future Gap raises some interesting questions about the lack of planning by individuals for their futures. The study points out that there are implications for this forward-looking gap- for individual well-being and for society.
This study had me wondering how this lack of thinking into the future hinders people from reaching future goals and how the financial services industry- particularly focusing on retirement- can help individuals visualize (plan) for their future.
Here is a summary of some of the more interesting findings from the survey.
Most Americans surveyed said they rarely or never think 30 years into the future. Many do not even think five years out. The longer the future time period, the less people think about it. The older people get, the less they think about the future. Having children or grandchildren did not increase future thinking. However, having a brush with mortality did.
One quote was particularly relevant as it applies to how we approach retirement- both from financial and non-financial aspects.
“Thinking about the 5-year, 10-year, and 30-year future is essential to being engaged citizens and creative problem-solvers. Curiosity about what might happen in the future, the ability to imagine how things could be different, and empathy for our future selves are all necessary if we want to create change in our own lives or the world around us.”
Creating Plans and Setting Them in Motion
Thinking about something and actually putting the wheels in motion to make it happen is an entirely different question. We must not only think about our futures, but also follow through on implementing our plans. Sometimes this takes some nudging or having someone help us create the plan and hold us accountable for following through with the plan.
It would be interesting to look at these years-in-the-future numbers. If, for instance, in some way, a follow-up survey could be sent to see if any of the things people thought about, they actually made plans for or in any way prepared for these different time periods. For instance, I am sure many people thought about or daydreamed about retirement.
But, ultimately, were there any plans made about how they wanted to spend this time? It should be noted that one of the key findings in the study was that the older people got, the less they thought about the future. With people retiring in their 50s and 60s- there is a pretty good chance their retirement might last 30+ years. Even as we age, we need to think ahead and plan for our futures.
Goal Hinderance Can Adversely Affect Retirement
As previously noted, the study includes a number of key findings that show that only a small percentage of people think about the future. 17% said they think about the world 30 years out at least once a week; 29% think about the 10-year future at least once per week, and 35% think about the 5-year future at least once per week.
Of course, flipping these percentages around for those who do not think about these future time periods, it is clear that we don’t look very far out when planning our lives. This can be detrimental in a number of ways.
This lack of planning is likely to have an impact when saving for retirement. If we aren’t thinking about this time period, it is likely we are not saving at the level we may need to for this time. Additionally, if we don’t take the time to plan for our future- to peer into what we want life to be like- we also are not likely to end up with the life we envision during this time. The goal that is typically the furthest out and one that we plan for at some level is retirement. But if we tend not to plan too far into the future, are we short-changing our retirement, both financially and non-financially, without realizing it?
Ways to Get Clients Thinking About and Planning For the Future
For the reasons mentioned above, people do not think too far in the future. However, what if some of the results of the study were used as ways to get people to think about the future?
Here are six ways to help clients think about the future.
- Envision the Future
One way to help clients think about the future is to discuss how longevity is changing and that they may have many years in retirement. If we can get them to think in terms of what they would like to do during this time- interests and activities they want to pursue, perhaps we can begin to get them to think a little further into the future (even if it isn’t once per week!). If we can help them explore what they want to do in the future- retirement- then perhaps they will also connect their need to save more for this time. This flips the script and focuses on their future goals and dreams and how their money will support these.
A recent article in the Journal of Financial Planning, written by Daniel Crosby, Ph.D., the chief behavioral officer at Brinker Capital, pointed out (titled) 22 Behavioral Nudges to Optimize Client Outcomes.
Similarly, one of the 22 nudges is Take a Long-Term View. Here is what Dr. Crosby says about this approach: “Long-term thinking occurs when the future is made more salient by talking about future goals, getting details about specific future plans, and having the client put themselves in the place of a loved one who is in the same sort of situation they will someday find themselves in (e.g., nearing retirement, having health problems).”
2. Use Client-Directed Problem Solving
In the 22 Nudges article, Dr. Crosby offers: “Nothing engages a client quite like involving them in the process.” He goes on to say “But we tend to be much more easily persuaded when the ideas for self-improvement originate with us. When seeking insights into client behavior, start at the source and see what ideas they have for how to improve their own decision-making.
Similar to this nudge, Dr. Crosby also includes Goal Setting in the list. This involves arriving at the goal together by focusing on the specific, smaller steps, that can be taken to the longer-term goal. Frame all future planning conversations around the goal (e.g. retirement planning) to maximize engagement. Another nudge he mentions, Habit Formation and Shaping is similar- habits take time to change- make incremental changes by creating multiple steps toward reaching the larger or future goal.
3. Reflect On the Past and Imagine the Future
Two additional nudges mentioned by Dr. Crosby can also help plan further into the future- Considering Past Outcomes and Comparative Imaging of Future Outcomes.
Considering Past Outcomes involves understanding how we have reacted to past situations that have framed our current thoughts. Understanding these can help us push beyond these and see a different (and possible) future.
Comparative Imaging of Future Outcomes is making something (future goals) feel more possible and real. Distinguish between possible future paths by imagining what the future may look like by following one path versus following an alternative path.
4. Use Shorter Time Frames To Think About the Future
But what if we had clients view their futures through shorter time period lenses? So, instead of looking 30 years into the future, we helped them plan in 3-year or 5-year increments? Create shorter plans that clients can get behind and revisit and revise the plan after three or five years. This gives the client a stronger visual of their future- one they have more clarity that it can be their reality, more confidence that they can attain, and more control over reaching the goal- or progress gained toward the goal(s). If this can be done for a few years, a habit of creating and reaching can be developed. Momentum is created.
5. A Brush With Mortality
Some questions can also be asked to get people thinking about their own “brush with mortality.” This can be particularly helpful when asking clients about retirement and learning what is important to them and what they want to accomplish- what brings purpose and meaning to their lives.
Questions to ask that bring their future closer to the present include:
- If you only had five years to live, what would you want to do, see, and accomplish during this time? Your life has been cut short by 20-30 years, what will you focus on during this time?
- If you only had one month to live, instead of thinking about what you would do with your remaining time, think about what you wish you had accomplished, what regrets would you have, and what dreams and goals would you have to let go of?
This is saved for last as it is probably the most important nudge. Dr. Crosby included it in his list, and I agree it very important. Taking time to learn about what we may not know or understand can be powerful for us in planning for the future. The example in the article makes a great point “You don’t have to have the knowledge of how to fix your car, but you should at least know when to call a professional and what to look for in a competent auto technician.”
Framing our conversations with clients in these three ways can help clients visualize their future- and hopefully, with our guidance, make plans- both financially and non-financially-of how they want their futures to look like.
As I previously pointed out, realizing that planning for the future is important, but what is much more important is for us to follow through on carrying out the plan. The follow-through, the discipline, to carry out what helps us get to our desired destination, is often the hardest part.
Reach out to me if you would like to help your clients plan AND follow-through with their retirement lifestyle planning. Sometimes a little nudge and accountability can be just what is needed!