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Climbing Everest: A New Perspective on Helping Pre-Retirees

Is a DC plan enough to get participants to where they need to be financially when they make that jump into retirement? What practical steps can advisors take to help participants get on track and stay there?

Jeanne Thompson, Fidelity Investments' VP of Thought Leadership, revealed findings from new Fidelity research into those questions at a NAPA 401(k) Summit general session April 18 -- research that offers a new way of looking at pre-retirees. Thompson was joined by co-presenter Harry Conaway of EBRI and moderator Nevin Adams of the American Retirement Association.

What drives the decision to retire? Fidelity's research identified five factors driving the decision to retire, Thompson said:

  • Financial (assets, debt and the cost of health care)

  • Family (caregiving responsibilities, grandchildren, spouse/partner)

  • Lifestyle (desire for leisure, structure, meaning in life)

  • Job (passion, recognition, sense of identity)

  • Health (stress level, physical stamina, mental acuity)

The research led the team at Fidelity to develop a three-stage model to better understand the changes that pre-retirees go through in the latter stages of their careers, Thompson explained -- an evolutionary step from the traditional view of pre-retirees as a homogenous group. Using the challenge of climbing Mt. Everest as a context, the three stages are, in chronological order:

  • Climbing. Ending about 10 years before retirement, in this phase the pre-retiree is in good health and happy with his or her job. Finances are the main concern.

  • Base Camp. Stretching from about 9 years to about 2 years from retirement, in this phase pre-retirees are starting to feel like they've had enough; they're less interested in new opportunities; and their physical stamina starts to decline.

  • Summit. This is typically the last 2 years or so before retirement. Pre-retirees have significantly less debt and more job-related stress, and want to spend more time with family.

Turning to the kinds of help that participants in each group are seeking, Thompson cited:

  • Climbing: Understanding Social Security; financial planning; working part-time with benefits.

  • Base Camp: Understanding Social Security; financial planning; retirement income help; understanding health care options.

  • Summit: retirement income help; understanding post-retirement health care options.

One area in particular where advisors can really help pre-retirees is dealing with the cost of health care, Thompson said, which tops most retirees' and post-retirees' lists of concerns about retirement.