Pre-retirees are naturally thinking about their retirement risks, i.e., unexpected death of their partner, a lengthy illness, a pension plan disruption, inflation, stock market volatility, even government policy changes. In fact, the Society of Actuaries (SOA) in the United States has even grouped them into four categories:
- Personal and family – changes in your life or that of a loved one
- Healthcare and housing – changes in cost of healthcare and/or lifestyle
- Financial – changes involving investments
- Public policy – changes in governmental policies
However, there are other factors undergoing changes, too. When we speak of the changing face of retirement, we’re looking beyond basic risks and discussing plans to accommodate preferences pre-retirees are considering in retirement lifestyles and phases. The classic view of retirement is receding into the past. It began with Baby Boomers (mid-50’s to mid-70’s) and Gen X’ers (early 40’s to mid-50’s). Retirement has become more personalized and is no longer seen as a done deal of “quit work, don’t work”.
People are reconsidering ideas of how they want their “retirement” to look. Planning for sufficient income for retirement now might include adjustments accommodating potentially different income for different phases of retirement, based on personal visions. With the prospects of continuing some source of earned income beyond a career phase and the possibility of good health extended for years, planning may seem to require a juggling act. For example, being too cautious, spending too little at the outset, may limit lifestyle envisioned – while spending too much early on may increase the risk of life lasing longer than funds. For many in their 20’s to early 40’s, retirement planning may not even be on their radar yet. It is not only decades away, but many are saddled with student loans, credit card debt and maybe even the burden of caring for aged parents (especially those parents who failed to plan adequately for retirement).
Americans are adjusting all the time. How best to cope with seemingly constant change and anticipate future needs is what financial planning is all about. It’s bringing a realistic vision of your future into the present to make decisions today that will get you there. The first step is balancing current expenses with saving and investing. We use a three-circle approach for emergency reserves, long-term savings for retirement and in-between savings for large goals, like college or home purchase. Dave Ramsey talks about his “baby step 4”, investing once debt is gone and emergency funds are in place. It is now time to seek the expertise of a financial advisor. We recommend a Fee-Only, CFP® professional to ensure the highest qualified, objective advice. After all your hard work, you deserve the comfort and assurance of a trusted relationship that will help you think through all your options and make solid decisions in funding your goals and dreams.
Have a great weekend!