The Changing Nature of Retirement

The way we view and plan for retirement has changed significantly over the years. In the “old days”, retirement meant riding off into the sunset, inclusive of a move to Florida and hours upon hours of golf and shuffle board. Today, retirement is vastly different – people are living longer and generally are subscribing to a far more active lifestyle over more years.

The first significant change to note is that many retirees are no longer simply managing pension and collecting the interest from bonds. That form of retirement is largely gone, as pensions are becoming fewer and the interest generated from bonds is minimal based upon low interest rates. Now, with the advent of 401(k)s and IRAs, retirement is far more complex. It is now more important than ever for retirees to save and manage their wealth themselves. Ultimately, this change has led to a need for continuous retirement planning and far more uncertainty, and has highlighted the importance of having a strong relationship with a financial advisor.

The second major difference in today’s retirement lifestyle is that people want to be more active and engaged in retirement. This is largely accomplished by staying involved in the workforce with part-time employment or by turning a hobby/interest into a business. There are many benefits to this type of retirement, including additional income/retirement savings; by remaining active research has shown that aging happens more slowly; increased activity leads to increased energy levels; and, mental acuity remains at a higher level. In sum, people are working longer – for better or worse.

The third and final major difference in today’s retirement is that people are living longer. According to the Centers for Disease Control and Prevention, the current life expectancy for females in the United States is 81 years of age and for males it is 77 years of age. In comparison, in 1950, the life expectancy was 71 for females and 65 for males. What is the importance of this increase in longevity? First, as mentioned above, it is more important than ever to continuously monitor your finances to ensure a long and financially secure retirement. Secondly, we need to engage in an active retirement in which we remain vital both physically and mentally.

Retirement is not what it was even a decade ago. If the nature of retirement has changed, so should retirement planning! If you are approaching retirement or are years away, it is very likely you will be impacted by these changes.

-Louis Shaff, CFO


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