Kick the can: The reasons behind Baby Boomers delaying retirement
April 18, 2016
By Martha Sullivan, CPA, CVA/ABV, CM&AA, CEPA
Partner, Succession Planning Practice Leader
We have all heard the demographics and news about the ensuing senior tsunami as the Baby Boomers reach the age of retirement. The numbers of boomers supposedly leaving the workforce over the next decade are no doubt substantial. However, you have also likely heard someone say “50 is the new 30” or that “80 is the new 65.” It sounds like one big game of “kick the can down the road.”
Two key factors driving this phenomenon of delaying retirement include:
- Resources: According to a survey Wells Fargo Bank performed, three-fourths of the respondents stated that it was more important to have a specific amount of money saved before retiring, regardless of age. Americans on average had saved less than 10% of what they believed they needed their nest egg to be. Many simply cannot afford to retire.
- Life expectancy: The Social Security System was put in place in 1935. Then, according to the Social Security Administration, the average life expectancy for someone born in 1930 was approximately 58 for men and 62 for women. Statistically speaking, nobody was expected to live to an age where they could collect the benefit. A newborn in 2011 has a life expectancy of 76 for men and 81 for women, living nearly two more decades than their 1930’s counterparts.
For business owners, the interest in retirement or exiting the business may be further delayed for other reasons, including:
- Control: The person who becomes a business owner more often than not was attracted to having their own business because it gave him or her a sense of control over their own destiny. Handing over the keys to the kingdom is handing over control.
- Identity: It is part of our culture that we are often seen as “being” what we “do” for our living. You don’t have to be a business owner to feel the weight of that seemingly simple question of “What do you do?” However, there is a higher tendency for business owners to allow the business to become their identity as they often eat, sleep and breathe the business all of the time.
- Emotion: Business owners serve multiple constituencies between their customers, vendors and employees as well as their families. If the business has multiple family members working in it, the complexities increase. Questions such as “If not me, who?” or “If I sell, will my customers and employees be taken care of?” are daunting and fraught with emotionally draining issues.
Many business owners (as well as other members of the workforce) choose to kick the can down the road as a result of these reasons. Reasons which can be summarized by a single word – fear. Fear of alienating people we care about. Fear of not being able to live where and how we want to, surrounded by people we want to be with. Fear of nothing to do for twenty years. Fear of the unknown. Fear of isolation and loneliness. The fear of loneliness, boredom and isolation is a healthy one. Science has proven the link between loneliness and its ability to suppress our immune systems.
However, kicking the can down the road can result in serious consequences for the business owner and their family. A disabling illness or worse could leave loved ones financially and emotionally devastated and the business teetering. Another frightening thought.
The best antidote to all of this fear is to name it, claim it, and then get down to the important work of addressing it. In working with clients, the sooner we can engage the owner(s) in the conversation about what they wish for in that next phase of life the better. While the approach to these conversations is structured, it is also adaptable to the individual’s circumstance. The value is getting what is important to them out on the table and then for them be able to share it with the important people in their lives. For example, some topics include (but are not limited to):
- Where do I want to live?
- How do I want to live?
- What do I want to do with my time?
- How do I want to interact with others – my family, friends, community?
- What are my resources? Are they enough? What are my options?
- How do I finish my life strong, leaving others in a good place?
Once identified, the discussion moves to what it will take to achieve it. Insights such as these set the foundation for creating a plan of action and then setting off to do it.
Action calms fear and sets the stage to remove some of the mystery out of what the future may hold. Rather than randomly kicking the can down the road, the path is clearer. And maybe 80 is the new 65… you’re just better prepared to enjoy it.