Thoughts on Retirement: This is not Your Father’s Oldsmobile!

Some of you might remember the famous phrase from a General Motors commercial many years ago – “this is not your father’s Oldsmobile.” Well, for those of you considering eventually retiring, I have news for you: “This is not your father’s retirement.” Unfortunately, surveys conducted during the past several years have shown that the majority of Americans are financially unprepared for retirement and are not even aware of their predicament(1).  

I think a likely explanation for this situation is that there are both emotional and practical obstacles that make planning for this eventuality difficult, especially for people in mid-life for whom the need for planning is wise. Of course, the challenging mix of the tough job market and financial market volatility in recent years has understandably impacted many people’s retirement plans – and sometimes their willingness to take a closer look at this area of their lives.

And my conversations with clients, friends, and colleagues – especially those experiencing a career transition — lead me to believe that some people have completely given up on the idea because they believe you have to be a very wealthy to retire and/or they will never have sufficient resources to do so. This perception may or may not be correct, although for those who have not taken a closer look at their finances, their belief may likely become a self-fulfilling prophecy.

But I think there are also other important reasons that retirement is a difficult subject to tackle. America is undergoing important changes when it concerns retirement, yet much of what we read and what is discussed in the media approaches the subject from a very traditional perspective. The “old” retirement (your father’s “Oldsmobile”) was based on an assumption that we were supposed to stop working in our early or mid-60s.

Not only does the challenging financial and economic landscape make this view somewhat anachronistic, but other important changes in society also make it less relevant. Unfortunately, the mass media and our popular culture often continue to portray retirement in outdated ways that have become out of touch with our evolving world.

These factors – the combination of recent economic challenges and the continued portrayal of a retirement in outdated ways — makes it difficult for people to really think about this important part of their financial life. If there are not any relevant models that can help individuals approach such planning, it is perfectly understandable why many people have basically opted out of preparing for their long-term future.  

However, anyone in mid-life and thinking about the next chapter in their lives does need to consider their long-term financial needs in both their financial and even career decision-making. The remainder of this blog and my next installment will further discuss the recent trends that have changed retirement and more importantly what you should consider in your own planning.

One profound shift that is well known (but very frequently not discussed) is that life expectancies are significantly longer than they were for previous generations. This trend, which is likely to continue, has effectively “raised the bar” in terms of the financial resources needed to retire – even for people who have done a great job saving. Many studies today indicate that average life spans will take the average person into their eighties, and a smaller but significant percentage of people will live into their 90s.   

Even for those who have attained financial independence (either because they do not live an expensive lifestyle or through a high level of savings, or both), the traditional retirement “model” often does not makes sense because they actually want to remain involved in their profession, a new business interest or passion, or some other pursuit during what are supposedly their retirement years.

The reality for many individuals, regardless of their finances, is that they want to apply their years of hard-earned experience to continue to make an impact in their chosen line of work, while others may choose to pursue a new professional path that more closely reflects their values and/or passions.

For such individuals, withdrawing from their work is simply not an option because they have the energy and passion to stay involved in the world around them. Connection to work can provide important psychological benefits that in some cases are far more important than any positive financial benefit that comes from remaining involved in work into their late 60s or even longer.

In lieu of the traditional concept of retirement, I think there is a more contemporary model that more closely reflects today’s society. I will be writing about that very soon, and more importantly what you can do to enhance the quality of your life and also prepare yourself financially! Stay tuned for this next blog!

(1)       McKinsey Global Institute, November, 2008

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, please consult with your financial advisor prior to investing.

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