Last month, we discussed wealth from three aspects. This month, we explore resolving retirement challenges in all three domains of life. For most people, retirement anxiety has as much to do with emotional issues as financial ones. The newest thinking adds "human" capital, everything from earning capacity to feelings of personal satisfaction, to the funding equation.

What is "retirement" today? Sometimes, it seems to match the definition of doing less that you don't like to do and more that you do like to do. For many, retirement signifies taking you out of life's race…it eliminates the stimulation of challenges and learning.

For others, it may bring about the binary approach to careers; work versus retirement, with the notion of "phased retirement." This latter approach promotes the use of "human" capital, our career asset (value of individual's earning power, talent, and motivation) being utilized on a continuum and not being halted. The waste of human capital is a poor way to keep people active and relevant during later years.

What matters is that the very idea of retirement, like everything else that touches baby boomers, is now subject to reinvention and customization. Every client has an individual idea, based on his or her financial and human capital, goals, and desires.

Today the paradigm not only involves the "when" of retirement but the "definition" of retirement…the merging of the financial asset management with the career asset management (life's experiences, skills, associations, relationships, heritage, and core values.) The boldest attempt to quantify human capital is now exceeding the boundaries of traditional asset allocation to include the human capital into one's asset soup. However portfolios play a role in personal financial decisions, people are worth more than their bank accounts or their pension plans. The integrating of their human capital into their financial capital transcends wealth from personal success to holistic significance.

Of course, retirement is not just about fulfillment. How to spend down retirement portfolios without running afoul of longevity risk has also attracted increasingly sophisticated analyses from the financial planning community. Investment/portfolio risk, longevity risk, and consumption/inflation risk are greater today than they were in the past. Adding in "behavioral" risk means that people who stay "young" in retirement (they're healthy, active and vital) may also be tempted to overspend as long as incomes continue. As advisors, we need to examine the lingering attachment to an income system in relationship to the temptation to withdraw too much from income-oriented assets. This makes it crucial to develop successful draw-down strategies.

The modern asset allocation model today, not only examines the case for people to annuitize some portion of their capital, but also to invest in non-correlated (separate from stocks, bonds, and mutual funds) "institutional" income investments such as energy, non-traded real estate, and lease management holdings. This diversification has historically increased return while lowering risk. When this is integrated to also include the "shadow" asset class of human capital, total wealth is maximized.

Advisors need to understand the client's career in order to properly diversify client portfolios (including financial and human capital). Does the career resemble that of a stock (software engineer) or a bond (schoolteacher)? A software engineer coming from a highly volatile career may require less volatility in investments. Conversely, a schoolteacher's steady and certain pay and pension might be better suited for the equity diversification. This thinking assists clients to weigh their career changes. The net result might be that rather than to retire abruptly, phased retirement solves their need to stay active as well as financially secure. With today's informational society, a client's value will increase, not decrease, with age.

Whether the retirement purpose is maximizing security, maximizing possessions, maximizing meaning and purpose, or, just being content with getting by, each driving purpose presents different challenges in custom care and planning. What's clear is that a planner will need an expanding set of quantitative and relationship skills to deal with positioning clients in a manner that represents both their human and financial capital.