Fewer people are making a clear transition into retirement and the trend is creating unique challenges for advisors, according to Sherrie Grabot, CEO of Guided Choice and a speaker at the Retirement Income Industry Association conference in Boston on Thursday.
"What we're seeing now is a lot more people are getting stuck in the middle. They're not really making a transition," she said at the conference.
More and more baby boomers are opting for a partial retirement, and one-third of those who do retire end up returning to the work force. The most challenging group are individuals in their fifties who were forced to retire early and are unable to find new jobs.
"They're having a long period of time before they have Social Security or before they want to begin taking their pension," Grabot said.
To help the new generation of retirees, advisors should remember to keep things simple. It's not a good idea to approach pre-retirees or retirees with a full-blown financial plan, according to Grabot. It's much better to give them "bite-size pieces," starting for example with figuring out how to optimize Social Security, a complex task in and of itself. Once that's done, tackle other steps in the financial planning process, such as calculating clients' monthly income needs.
"Your job is going to be to keep it simple, so consumers can understand it," she said.
Grabot noted that 70% of households are going to retire with at least three retirement accounts, complicating the planning process. As one simple step toward simplification, she urged advisors to work with their clients so that income from Social Security and other sources go into a single account.
Today's retirees also should explore creative alternative retirement options. Grabot cited three instances of retirees who recently sold their homes and bought recreational vehicles. One couple "cruises camp sites around the country" while one gentleman spends his summer living in the national parks system conducting search and rescue missions and "hiking the Grand Canyon all day long."
"I don't think it's going to take a lot for people to figure out how they're going to retire unless they have a health issue," said Grabot. "If they don't have a health issue, what we're seeing is people are figuring it out in very fun ways."