"Exit" Strategy

This past week, we passed the “anniversary” of the commencement of bombing strikes in Operation Desert Storm (1991). Now, I was too old—and my kids too young—to have been directly impacted by that action. But I’ll always remember that night.

I was living in North Carolina at the time, and had been invited by a co-worker to my first NCAA basketball game at the “Dean Dome” at the University of North Carolina. Tickets had been hard to come by, and Chapel Hill was a nearly three-hour drive from where I lived (and on a “school” night, to boot)—but I was excited at the prospect. My friend and I got there early—grabbed some refreshments, found our seats, and sat down to watch the warm-ups. We were only about 10 minutes to tip-off when they made the announcement about Desert Storm—and the resulting decision to cancel the game.

Now, unless it is a playoff game, or a remarkably close contest, people have a tendency to exit such events early to “beat the rush.” In this case—and I don’t know how many people can actually fit in the Dean Dome—nobody saw the cancellation coming, so everybody tried to hit the exits at the same time. My buddy and I actually thought we were in a distant enough parking lot that we could beat some of it, but spent the next hour basically one car length from the parking place we started in—and another hour just getting to the exit of the parking lot.

For years, we’ve been worried about the Boomers heading into retirement. We’ve worried what would happen on that day when they would quit working (and cause our economy to come to a halt), worried that they would pull out all of their retirement savings from the stock market and invest it in bonds, and, most of all perhaps, worried that they would simply get to retirement without enough money to live through retirement. And while, on an individual level, those concerns are certainly real, we’ve also rightly worried about what would happen when they all tried to “exit” the working arena for the “home” of retirement at the same time.

Different Paths

A new study by Vanguard affirms what most of us know, at least anecdotally--people’s approach to retirement is about as variable as, well, people. The report highlights six different paths (see “Workers Plan To ‘Downshift’ Into Retirement” at ) but, of course, it’s more complicated than that. The bottom line is this: Working full time until you reach age 65 and then “retiring” appears to be the exception, not the rule. Apparently, people begin gradually cutting back in their fifties (by their late fifties, the rate of full-time workers falls to 62%)—and even by the time you get to the second half of the sixties, 17% are still working.

The good news could be that people are working, and saving, longer—and perhaps deferring tapping into their retirement savings beyond the date(s) that many retirement projections now assume. The bad news, of course, is that workers could be cutting back on work (and compensation) earlier than those same projections contemplate—and not always at the choice of the worker. Note that, among those who returned to work in the Vanguard sampling, more than half did so to meet basic expenses, and a quarter needed to pay for health insurance.

We’ve tended to think of retirement as a cessation of compensated employment and, perhaps simplistically, crafted certain financial assumptions around the notion that that occurs at a specific point in time. IMHO, the Vanguard study reminds us that the individual decisions around employment generally, and retirement specifically, are just that—individual decisions.

Accordingly, I’d like to propose an alternative definition for retirement in the workplace—an “exit” strategy, if you will—“to fall back or retreat in an orderly fashion, and according to plan.”

It’s an exit strategy in which advisers can clearly play an integral role.

- Nevin Adams