Many Americans dream of retiring early, yet it can secretly sabotage your clients’ finances.
As an advisor, it’s essential to highlight the benefits and risks of pivotal financial decisions. The consequences of early retirement are no exception. This article shares considerations for advisors when it comes to understanding and helping your clients refine their financial objectives around early retirement.
The Dangers of Retiring Early (the FIRE Method)
With stress, burnout, and increasing job market competition on the rise, the FIRE method (Financial Independence Retire Early) has become synonymous with the American dream. It continues gaining momentum among millennials and Gen Z, promising freedom from the daily grind and the opportunity to live on your own terms.
However, the desire to retire early (i.e., the FIRE method) is often shortsighted. It risks undercutting your clients’ personal growth, skill-building, and wealth potential. Here are three reasons why:
1. A Long Career Is Fulfilling
A well-rounded career adds value to our lives. It’s fertile ground to experience challenges, growth, and mentorship. Yet many people come to resent the office politics, burnout, and repetitive tasks that are also attached to many careers.
To retire early seems like an ideal way out for many people, yet the FIRE method also cuts out the many positives your clients will experience through long and fulfilling careers. Many early retirees aren’t expecting the restlessness and discontent that often comes with the retire early FIRE method.
Retired Software Engineer Anshul Sharma reported to Yahoo Finance:
After a few years of retirement, I started to feel bored and restless. I missed the challenge and camaraderie of work. I enjoyed working with my colleagues and solving problems together. I also missed the feeling of accomplishment that I got from completing a project.
You can help your clients avoid this mistake by encouraging them to brainstorm their options. Find creative ways to help them achieve the flexibility and space to do what they love — while continuing to benefit from a meaningful career.
As your clients gain financial independence, they won’t feel constrained to climb the corporate ladder. Instead, they’ll have the freedom to prioritize life over work (while still reaping the benefits of an accomplished career). They’ll also be more likely to choose a job based on their interests instead of chasing a higher salary alone. They may even find creative ways to create their own income outside of “employee status.” This shift of focus increases happiness and significantly reduces the job-related stress that sparks a desire to retire early.
2. A Long Career Fosters Learning and Skill Development
Along with a fulfilling career comes personal growth and valuable learning opportunities. And people become most skilled later in their careers, which promotes happiness, self-confidence, and prosperity for senior employees.
In fact, employees who are 65 and older are often the happiest, according to the Pew Research Center. Associate Director of Research Juliana Horowitz said senior workers are often the most satisfied at work (compared to their younger counterparts) because of their expertise, competence, and life priorities.
“The older you get and the more established you are in what you do, you know how to do your job better,” said Horowitz. “You might have more control of your daily tasks than somebody who’s junior.”
Talent.com Head of Sales Strategy Robert Boersma put it this way: “The combination of having the comfort and self-assuredness of understanding how to do your job, doing it well, and earning a higher wage — those are all the things that contribute to happiness.”
If your client hates their job, they shouldn’t stay. But that doesn’t mean they should stop working and miss out on the wealth of personal growth that comes with a meaningful career. You can help them get to a place financially where they can trade in their 9–5 for a new, fulfilling business venture that aligns with their interests and values.
3. A Long Career Leads to Prosperity
Living a prosperous life means more than financial stability. According to Merriam-Webster, prosperity is “the condition of being successful or thriving”, which extends beyond economic well-being.
If your clients are planning to retire early, they’ll need to make sure they have enough interests and pursuits to keep their bodies, minds, and spirituality fulfilled throughout their (possibly many) years of retirement.
And in terms of finances, many early retirees feel they’ve saved enough to retire comfortably yet realize years into retirement that their assets are dwindling.
Most people should expect to spend 80% as much as they did before retirement. And in the early years of retirement, having extra time to kill often leads to a “‘spending surge’ by new retirees on travel, home renovations or relocation, and other retirement-related lifestyle changes”, according to a J.P. Morgan Asset Management study.
Dedicating more time to building wealth with a meaningful career is the best way to prevent financial hardships in retirement. Your savings will have more time to grow, and you’ll have more time to use and refine the professional skills you’ve taken a lifetime to build.
It’s Not Enough to Help Your Clients Build Wealth
As financial advisors, we talk a lot about helping our clients build wealth with creative whole life insurance strategies. We all want to gain our clients’ trust and help them prosper. However, you must align your approach to your clients’ specific objectives if you want to build your practice.
Instead of selling to a broad, abstract goal (such as building wealth), successful advisors understand their clients’ wealth-building motivators, which are unique to each person. (It could be to protect their families, fund travel, invest in education, buy a new home, or create as much golden-years income as possible.) They then quantify what their clients want to achieve their particular desires.
When you understand their visions, dreams, and fears, you can present whole life insurance as a solution that helps your clients meet specific objectives, which you can visualize with a whole life insurance calculator.
You can also use the tools to help your clients refine their objectives. The visualizations show how financial decisions play out over time, exposing any part of their financial strategy (including retiring early) that could undercut their prosperity.
Build Your Practice by Helping Your Clients Prosper
If you want to learn how to talk to your clients about a healthy income strategy and prosperous financial objectives, consider Truth Training. It offers hands-on training and collaborative learning opportunities to help you grow your business.
You’ll learn straight from Todd Langford how to have impactful conversations with your clients and help them make the most of their finances by developing a prosperity mindset.