Does Traditional Retirement Still Exist?
By: Steven L. Schou, CFP®, AWMA®, Vice President Business Development & Wealth Advisor
For many soon to be retirees, their retirement future is nothing like their parents or grandparents retirement. For example, at the beginning of the 20th century the average life expectancy was 47 years old and only 100,000 Americans lived to age 85.
In 1935, when the Social Security Act was passed, the age of retirement was set at 65. At that time, the average life expectancy was 61 so planning for a lengthy retirement simply wasn’t a concern. Today, however, medical advances and changes in our lifestyle have dramatically increased how long you may live. Roughly 10,000 people turn 65 every day, and they are increasingly likely to live 25-30 years in retirement. By 2010, 6.1 million Americans were over age 85 and accounted for one of the fastest-growing segments of the population. It is estimated that by 2050 19 million people will be age 85 or older.
For our parents and grandparents generations, a person would work at the same place of employment for 40 years and receive a watch upon retirement. Those days are gone. In many cases the opportunity for a pension is gone as well. For retirement today, you are responsible for your future income which is based on your own savings and investments during your working life. By choice or out of necessity, many people may try a mini-retirement, take a career break, choose a second career, or start their own business when traditionally they would have retired once their reached the appropriate age. Additionally, an increasing number of grandparents have the responsibility to provide care for their grandchildren who live with them which places increased pressure on their income needs in their later years.
The bottom line is that the old rules were built for an economy and a society in which retirement was seen as a release from bondage – the liberating act from a lifetime of work. They were built for a time when most work was manual and labor intensive and retirement brought a much needed rest.
Your choices will have an impact on how much money you will need to save and accumulate for your retirement years. However, a prosperous retirement is not just about the money. It is about being able to maintain the life you decide you want, as simple or extravagant as that might be. How will you handle your four life stages of retirement – the transition phase, active phase, passive phase and final phase? What will your active phase memories be about when you enter the passive phase of your retirement? There’s no time for regrets.
What about income in this new, nontraditional retirement? Will Social Security represent a significant portion of your income or will it be a small percentage? Are you looking to maximize your retirement income from your nest egg, but are concerned about outliving your money? Should you take a traditional approach to creating income for your retirement when your retirement may not be traditional? Have you spent more time on your investment diversification than on your retirement income strategies? While some of the basics of investment diversification and income strategies are universal, adapting to today’s investment world and your specific income needs are of equal importance to your enjoyment in retirement.
You only have one retirement whether you consider yours nontraditional or traditional. Start planning today to make sure you are able to maximize your enjoyment.
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