The New Normal Retirement

Robert Pulit |
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It’s believed that retirement planning as we currently know it didn’t really exist until a few decades ago. Up to that point, people worked until 65 and then sailed into retirement on a pension plan. Over the next few decades, as life expectancy and years in retirement expanded, financial professionals came up with simple guidelines to determine how much you would need at retirement to maintain your lifestyle.

This is where some of the common retirement “rules” you may have heard came from. And while these tips may have worked for many in the 70s and 80s, it’s less likely that they apply to today’s retirees.

It’s not your Grandparents’ Retirement Anymore

Retirees today face a new set of challenges. Many carry debt or mortgages into retirement, and healthcare costs are continuing to rise. These expenses can quickly eat away at retirement savings, especially if you need long-term or specialized care.

For those in the Sandwich Generation, being caught between caring for aging parents and children who need financial support can cause additional strain. The financial burden of helping your loved ones with their finances may increase your retirement income needs beyond what you currently make. Keep this in mind when determining how much you need to live on post-retirement.

Manage Your Risks

There are no certainties in life, the markets, or the economy, but there are risks that you can prepare for. Two risks that retirees must confront are longevity risk and inflation risk. Both of these risks can have a significant impact on your planning.

Longevity risk is a newer phenomenon. The longer you live, the greater your life expectancy. This is compounded by the risk of inflation. Even at an example inflation rate of 3%, the cost of living doubles in 20 years. Not taking this risk into account could put your planned retirement lifestyle in jeopardy.

Retirement as a New Life Stage

Some retirees are now seeing their golden years as a new life stage that includes some form of employment or business. But this isn’t necessarily a bad thing. Imagine coasting through 20+ years of your life without being able to apply your skills, education, and experience in a meaningful way. Difficult to picture, isn’t it?

When you retire, you have the option to pursue the work that you’ve always wanted to do, instead of doing what you had to do. It can be an opportunity to take control of your life, and open a new chapter in work or education you find exciting and engaging.

Though retirement does require financial preparation, it requires emotional and psychological preparation as well. Having the financial means to retire is only part of the picture; you should also consider the emotional aspect of retirement, and how you’ll make the most of this new life stage.

Retirement isn’t an event with a finish line, where you’re done planning when you finish your last day at work. It’s an ongoing process. And while pursuing your financial goals is important, it’s also important to consider your quality of life. If you need help creating a retirement plan that meets your financial and lifestyle goals, consider talking to a financial professional.


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