A Nudge Too Far: Opportunities and Challenges for Advising the Reluctant Retiree

September 2013
Summary

Retirement plans commonly “nudge” individuals into plan participation and a default investment option (typically, a target date retirement fund) if they do not make an affirmative choice. Target date funds may offer an acceptable default during the wealth accumulation phase since they address diversification and asset allocation issues. But consider the retirement decision. Should there be a default policy regarding retirement and wealth disbursement? Data from a survey of university professors aged 60 and over suggests that retirement is a complex decision of a highly-individual nature. A large percentage of the survey respondents are reluctant to stop working at a “normal” retirement age, and reluctance is often based on a combination of financial, institutional, and social/emotional factors. The majority of the reluctant retirees have not received any financial planning advice or life coaching regarding the retirement decision. For universities, the opportunity is to move beyond “one-size-fits-all” retirement policies by offering access to independent financial advice along with tailored professional performance assessment. For faculty in the retirement “zone,” the challenge is to balance skepticism about financial advisory services and products with the legitimate need they have for assistance. For advisors, the opportunity is to serve this growing need; the challenge is being familiar enough with the faculty client and university context to understand all of the factors influencing the retirement decision, but also far enough from the employer to be viewed as independent.