401(k) Participant wishes to plan for retirement
Retirement plan participants are usually told to focus on saving as much as they can. They are told to maximize their income and benefits like Medicare and Social Security in their post-career years. But what is often overlooked are the desires of 401k participants. This is sometimes called the “softer” side of retirement planning. In other words, what 401(k) participants really want when they no longer show up to work five days a week.
Amy Ouellette, Senior Vice President of Retirement Services at Digital 401(k) recordkeeper Vestwellrecently wrote a column for Benefits News on this very subject. She wrote: “If the idea of retirement is all about getting away from a job, we are setting people up for disappointment. Images of travel, golf, gardening, and sailing fill retirement dreams, but is that enough to generate satisfaction, or will the shine begin to dull? Instead, there are other equally important factors to consider when planning for retirement.
Ms. Ouellette pointed out that work gives people a sense of identity and meaning, but what happens to them after retirement? She reminded that it is equally important to be intentional about one’s identity once retired to avoid a loss of sense of self and purpose. Many people, for example, often embark on a “second act”, which allows them to pursue a passion or an alternative career path for which they did not have the time or the motivation for during their first years of career. .
Desires of 401(k) participants may include maintaining social connections in retirement. At work, employees have a ready-made network of colleagues, customers, and friends. In retirement, social connections can be more difficult to cultivate and maintain. This, especially in times like pandemic years! Many older people have been isolated due to the Covid-19 pandemic. According to Ms. Ouellette, it is essential for retirees to be committed to building friendships and relationships, especially as they age. “Mental and physical well-being is linked to a number of factors. One, which is financial security. The social bond is happened to be of far greater importance to longevity, self-esteem and health,” she wrote.
Conversations about caring for aging parents as this generation ages are also critical. The desires of 401(k) participants also include long-term care and other health care concerns in retirement. These can often be overlooked. However, they are an essential part of retirement planning, not only from a financial perspective, but also from a quality of life perspective. Questions need to be considered, such as the level of care required, how will it be funded and does it require leaving the family home?
Ms. Oullette also noted that it’s important for people to figure out what constitutes a fulfilling retirement for them: “What does it mean to you to work or take care of your children? Are there other areas of your life (hobbies, volunteering) that give you a sense of satisfaction? What might you be interested in learning more about? The second career option can also be attractive. As Ms. Oullette pointed out, Colonel Sanders of Kentucky Fried Chicken fame didn’t start the franchise until he was 60 years old. Additionally, for those with aging parents, she suggested that a trusted third party, such as a financial planner, be on hand to support families in necessary and often difficult conversations.
Be certain, preparation for retirement looks different for everyone. However, the focus is often on accumulating sufficient assets for retirement. Sometimes the real meaning of what workers are saving for can go unnoticed. Encouraging workers to reflect and have these meaningful conversations now can help solidify for them what this means for retirement. Always stay aware of what 401(k) participants are really working towards. It can help them focus on their financial needs and clarify what a fulfilling retirement means to them.
Steff C. Chalk is executive director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff is also Executive Director of The Plan Sponsor University and is currently a professor at The Retirement Adviser University.