New Research Reveals the Four Pillars of Success in Retirement
Ric Edelman: One of my dear friends, Dr. Ken Dychtwald, is the world's leading expert on the science of aging. He's the founder and CEO of Age Wave. And you have heard and seen Ken on this program in the past. Ken has released a study in conjunction with Edward Jones. His study is Longevity and the New Journey of Retirement. So I wanted to bring Ken back on the program to talk about this study - what it is teaching us, what lessons we need to learn from it. My good friend, Dr. Ken Dychtwald, psychologist, gerontologist, best-selling author of 18 books. And I'm just super excited, Ken, to have you back on the show. Welcome back.
Dr. Ken Dychtwald: Always good to see you, Ric.
Ric: So what was it that you wanted to study in this new report?
Dr. Ken Dychtwald: So I have now been working in the field of aging and the study of this process of becoming a grown up for, believe it or not, for 48 years. I mean, it's astonishing to me. And I was always the 23-year-old, the 25-year-old, talking about what happens when people turn 60 or whatever. And now I'm 72. And what I wanted to do in this study was to really kind of turn the soil and to uncover some new insights. And a couple of things that we went after, we try to figure out how people are viewing today when they reach their 55th or 60th birthday, how they're viewing this period of life we call retirement compared to the way their parents did. And, you know, we'll go back and forth on a few things. But let me start with this one. Big, not a surprise, but boy, it came out loud and clear that people said that their parents, when they reached their retirement age, they kind of thought they were at the beginning of the end and it was a time to relax and wind things down. Period.
Ric: Well, yeah, I mean, Ken, we were you know, you were retiring at 62. You're going to be dead at 65. I mean, that was the way it was.
Dr. Ken Dychtwald: Yeah. So you'd have a few years to kind of catch your bearings and have a little time to socialize and maybe travel a little bit. And then it was over. And by the way, something that you've been teaching me for a long time, you didn't need that much money if you're only going to live a few extra years. Right now, people are saying that it's an entirely new chapter of life. And we asked them how long would they like their retirement to be? And on average they said 29 years. Wow. And then we also asked them, would you like to live to 100? And just under 70%, 69% of the total respondents. And there was a representative group from across America and Canada so it wasn't just rich people or poor people or healthy people or sick people.
People are now beginning to get this idea that living 90 or 100 years is maybe in their future and they want to not be working a lot of that time at the end, or at least not working as hard or as full time. Almost 60% of people said, Ric, that they'd like to be working some in retirement, partly because they'll need the extra money and also because, you know, it might be fun to interact with people and to try some new things at work. And a little bit like what you and Jean have been doing and Mattie and me too, that, you know, maybe even changing the portfolio around a little bit. So you'll do a little more pro bono and you try some new things that you might not have done in the core of your career. So the first big aha was that there's a brand-new version and vision of retirement coming that people are getting to think about a lot more. And they also told us that they don't really know how to prepare.
Ric: And that's really the key issue, isn't it? That I have to assume that people are reaching this stage of life with the realization 'I never thought I was going to live as long as I now realize I'm going to live and I don't know what to do with my life post 65'. You know, playing golf, that's going to get old pretty quick. So what do I do if I'm going to be alive another 35 years? People, I think, are aimless, aren't they?
The Four Key Pillars: Finances, Health, Family and Purpose
Dr. Ken Dychtwald: Well, we organize this work, the work we've been doing with Edward Jones around what we're calling the four pillars - their finances, health, family and purpose. And what people said was that they think they know what matters to them and what they're going to do more of in their retirement, which is to spend more time with family. And by the way, they define family different than our parents did, it's not just your blood relatives, but people who you care about a lot - they become your family. Then they said purpose. I don't know how I'm going to figure that out. You know, I've been sort of a bookkeeper. I've been a financial advisor or I've been a physics professor my whole life. I don't know how to become some different version of me. I wish there was a boot camp or a summer camp or a training orientation program to help you find new purpose. And then they said that health scares them. On the one hand, they felt that psychologically they were growing stronger, more resilient, more filled with gratitude as they age. So that's counter to the usual portrayal of older people as kind of fallen down and can't get up and, you know, just kind of knuckleheads in the corner. They were saying that they felt wiser than they had ever felt, but really frightened about illness, really frightened about suffering and becoming increasingly aware that it cost a lot of money out of pocket to stay out of institutions and to stay healthy. And last, they gave themselves the lowest grade on their comfortableness and confidence and preparedness for finances. 80% of the population basically said they don't have a clue how much they're going to need to go the distance because it's so much that's unpredictable about it. And they could really use some help.
Ric Edelman: And in that part, of course, I know an awful lot about. And that's, I think, why Edward Jones was so interested in helping sponsor your research, because we do know how much they're going to need and we know they don't have enough saved. And folks, I think, intrinsically know this. I don't have to have a financial plan done to confirm for me what I suspect that I don't have enough saved because I haven't been saving very much throughout my working career. I haven't been very successful with the investments I have been buying because I don't know what I'm doing. And they're fearful that they're going to quit work in there 60s, live until their 90s or hundreds and not have sufficient amounts of money. On top of which we hear about Social Security's challenges, pension challenges in the country, on and on and on. So yeah, I'm not at all surprised to hear you say that people are running scared about their personal finances.
Dr. Ken Dychtwald: And there were two other major kind of zones that we went after in this new work. And by the way, the entire study, we've insisted and Edward Jones has been very generous, the entire study is being made available for free for anyone who wants to read it. And it can be found at EdwardJones.com/NewRetirement. The second area was - and this is going to sound a little bit crazy maybe, but back in the 1970s I had the good fortune of doing work with a Viennese physician named Dr. Elisabeth Kubler-Ross. And she's famous now because she crafted these five stages of grief and bereavement. And I've thought about Elizabeth's stages for many decades, and I thought we generally view retirement as like an on/off switch. You're working, you're not retired, boom, you're retired. And that's all there is. And I thought, come on, that's pretty simple-minded. It's far more (probably) of a journey than that. So we reached into these questions and we tried to see if there were in fact, stages of retirement.
And let me tell you what emerged. First, there's a stage we've named anticipation. It's about 10 years before retirement. You might be in your 50s, you're busy with your career. You may be raising your kids; you might be caregiving a parent. You're not really thinking about retirement a lot, but you're beginning to wonder what's going to be around the bend for you in that stage of life. And by the way, in the years 10 to five before retirement, people are craving financial guidance and insights.
They don't want to wait until the night before. They want to be thinking, okay, what's going to cost? Should I be downshifting my home? Should I maybe work another five or 10 years? They're beginning to ask those questions in anticipation of this big new stage of life.
The second stage of retirement, the first 2 to 3 years after people retire, Ric, and we named it liberation/disorientation because there was like a schizoid mindset going on. On the one hand, people felt I made it, I'm free, I can sleep late, I can wear my pajamas all day. I can play golf seven days a week. I can watch basketball every night of the week. I can do whatever I want. So there was a sense of liberation. But on the other hand, it struck people like, Wow, who am I going to talk to during the day? When people ask me who I am, what am I going to tell them? What am I going to do for the years ahead? Who do I want to be? Where do I want to live? Who do I want to relate to? Do I have the right friends? What if your friends are still working and they got no time for you? So there's a lot of disorientation that goes on. And by the way, once again, people are saying that I spend enough time really thinking about my finances because all of a sudden now they're not getting a paycheck. And I tell you, for those of us who get paychecks every week or every month, all of a sudden enter into a stage of life where that stops other than government support, it's very psychologically disorienting for people.
But then people kind of find their way and there's this big 15-year period that we call reinvention. And what we saw was that people's emotional states start to rise. They start to feel like they got this and they find their way. Maybe it's spending more time playing with family, maybe it's writing a book of poems, maybe it's learning how to travel the world. We've got so much freedom now, and people talked about having freedom from- for the first time in their life, I don't have to please my parents anymore, I'm a grown up. And also freedom to hey, if I want to learn how to play guitar, I never had time for that, I do now. And then there's a fourth phase. 15 years into retirement.
And keep in mind, people here, Ric, or around 80, we named it reflection resolution. People are starting to realize that they've lost a loved one, that they're counting the days, summers years till the end. And there's a desire to leave a legacy. And there's a desire to kind of be your best version of yourself. And even though we often hear about socially isolated older people or poor older people, the predominant portion of our country who are in their later years are feeling not frightened of their lives, but they're feeling a certain fortitude and appreciation for the lives they've lived. And they're smarter than we are because they are separating out the things that didn't go well and more appreciating the people and the circumstances that made their lives special.
So there are these four stages that unfold, and we thought that was helpful even in terms of financial planning if you're in the 10 years before. Oh, by the way, one other thing, Ric. I did a focus group with 50 people in Southern California, and they were from all walks of life. And I asked them, when should people start saving for retirement? And so I had 50 people, different backgrounds, different ethnicities, different sexual identities. It was a full spread of humanity. And I said, okay, raise your hand. I'm going to go in five-year increments, 20 to 25, 25 to 30, 30 to 35 and so on. When should people start saving for retirement? I said, All right, let's start at the beginning. 20 to 25, every hand in the room went up and they said, in fact, earlier than that. But as soon as you got anything, to start saving and make it automatic, don't cut into it. Don't think of it as sort of a plaything in a way. It's almost like a science fiction story. Your young you has got to have the mindfulness to not only earn enough money to enjoy your life as a young person, but you have to be funding your older you all along the way. And Ric, you've explained it to me many times that the power of compounding in time can be your greatest asset if you stick to it over the course of a life.
Ric: And is that the primary advice that you would give to today's younger generations?
Dr. Ken Dychtwald: I'd say four. And then I want to tell you about the four different types of retirees we found. One piece of advice is maybe for our grandparents between pensions and entitlements and GI benefits and such, you didn't have to put so much of the responsibility on yourself. Now it is. Yes. Start saving immediately. You know, and as you've said, birth is probably the best time. For your first-year birthday, there should be an account set up.
Second, take really good care of your body. We saw in this study, Ric, that people, even with a lot of money who said, oh, you know, I've got all this money, but I'm in pain or I've got cognitive loss or I can't walk anymore. This is no fun at all. I wish I would have taken better care of my body.
Third. Kind of the old Crosby, Stills and Nash, you know, love the ones you're with. We get so busy with our careers and money and identity that we sometimes don't cultivate our bonds with people who matter. And that nourishing zone of relationships is even more important as we grow older and pull away from work and school.
Fourth, find a new purpose. You know, maybe in an earlier era you had one purpose. You figured it out when you were a teenager, and then you tried to do your best at it. But you know, Ric, as you and I have talked about and probably a lot of your listeners are thinking about, you might be 65 and thinking about, I want to coach a basketball team - the high school, or I want to be an entrepreneur, or I want to maybe move to a new neighborhood and make new friends. And so finding new purpose and giving yourself permission to try a few things before you feel like you've got to get it right. That's my advice.
Ric: When you went through the study, you've identified these four ways, the four stages of retirement that you describe. Talk about what life is like in retirement because I think what you're painting is a very hopeful picture that although it's new and disconcerting because we've never gone through it before, others have gone through it, they've paved an effective path for us and the future really is bright.
Dr. Ken Dychtwald: Yeah, in fact, this is my favorite part of the research. Again, EdwardJones.com/NewRetirement - for those of you who want to see it in more detail because we're just hitting sort of the highlights, we actually dove down into people who are retired and said like, how are they doing? And what we got back is some are doing well and some were not. And then we could also reverse engineer them to see what they did, to get them to how they wound up. So, for example, one segment, about a quarter, we've named the purposeful pathfinders. And your listeners may want to think as Ken goes through these four, which do you want to be or which are you? Purposeful pathfinders started saving earliest of all the retirees. They feel financially secure. They are loving their life. They feel like these are the best years of their life and they're trying all kinds of new things. And by the way, they're also very generous. Frankly, Ric, you're a purposeful pathfinder with all your charitable and humanitarian work and all of your interest in trying new things. You and Jean are kind of you could be the poster boy and girl for purposeful pathfinders.
Ric: Well, thank you.
Dr. Ken Dychtwald: And they like who they are. They like where they are in life. Second, there's a different group. We call them the relaxed traditionalists. They're also doing well, financially secure, feel like they're living their best years, but they have very modest dreams and expectations. It's kind of like yesterday's retirement. They want to relax. They want to play; they want to watch TV. They want to enjoy their grandkids. My feeling is all good, but not a lot of contribution, not a lot of trying new things.
Then there's a third group that's not doing so well. They're the challenged but hopefuls. What's their deal? First of all, they're good people. Interesting, caring. Got all sorts of big dreams. However, they realized that they didn't save any money and now they're freaked out in retirement because they don't think they're going to be able to stop working. They don't think they're going to be able to live their dreams, and they probably won't. They're going to have to make a lot of modifications, a lot of tradeoffs. And they're feeling a certain sense of disappointment in themselves because they didn't take money seriously enough.
The fourth group, which was the largest with 31%, we've named the regretful strugglers. Some of these folks were dealt a bad hand. Someone they love got sick and they had to leave work to care for them or they struggle with a health problem or their job became obsolete. But the preponderance of people who are regretful strugglers just never really took very seriously the idea that they should kind of invest the time and energy to shape a positive retirement. And so they're not happy. They have very little money.
They're worried about everything. And they're not looking to live to 100 at all. So we've got the purposeful pathfinders, the relaxed traditionalists, the challenged but hopefuls and the regretful strugglers. And then last point on this. It's not just a matter of fait accompli. This is what you turned out. We started talking to people in their 30s and 40s and said to them, which of these groups would you like to be? And pretty much, well, everybody says, I don't want to wind up a regretful struggler, and I'd like to be kind of maybe a blend between a purposeful pathfinder and a relaxed traditionalist. We said, fine.
Then here are some of the steps, and we've outlined them in the report what you can take to get you to the better version of retirement. And that's the first time anybody has done this, because most of the work on retirement has either been isolated into one silo money or housing or health. So to do it in a holistic fashion, and then to top it all off, we talked to people who felt that they were having the grandest time of it in their retirement. And we said to them, what are the lessons you would teach younger people? And they said, be mindful about money and take it very seriously your whole life. Take great care of your body, build new friendships, because the one you have, the ones you have, some will move away and some will pass away. And they said, do something important for future generations. If all you're concerned about is your own self-indulgences, you're not going to be leaving much of a legacy.
Ric: That's incredibly profound. Ken. Not at all surprising coming from you because it builds on your decades worth of work in this area. What I'm finding most fascinating is that you didn't merely identify these four categories of retirees, but you laid out how to avoid being in the one category nobody wants to be in with actionable steps that you can take to make sure your retirement is everything that you would want it to be, so that, you're right, has never been done before. And I think everybody getting a hold of that report is going to find it of tremendous value. Tell us again how people can get access to that for free.
Dr. Ken Dychtwald: And I will in 30 seconds. But let me first say, we also saw that life can just sometimes hit people sideways. You know, you can do all the right things and have a heart attack or, you know, you can do all the right things and somebody you love goes through a period of depression. So it's not as though you can lock everything down, but it's not all as free floating as a lot of folks think. There's a lot of steps you can take to cause your retirement years to be fantastic. The study is called Longevity and the New Journey of Retirement, and it's available for free with lots of guidance and advice - no charge, at EdwardJones.com/NewRetirement.
Ric: I've read the report. I strongly encourage you to read it as well. You'll find it both insightful as well as actionable and most importantly, empowering. And that, of course is your greatest gift to all of us is the empowerment you provide. Dr. Ken Dychtwald, the founder and CEO of Age Wave, the world's leading expert on aging. Thank you so much for joining us on the program. I really appreciate it. Always good to see you, my friend.
Dr. Ken Dychtwald: Always good to see you, too. Thanks so much for your interest.