Retirement won't look like your parents' retirement

Retirement planning often focuses on the need to save for retirement, how

to save, how to stretch out your retirement dollars, etc. But what exactly

are you retiring to? What will your retirement look like? What is your personal

vision for retirement? Just stop working? Travel? Golf?

Whatever your vision, it will have financial consequences, which is

why many financial planners, including Dennis Filangeri, a certified financial

planner based in San Diego, say it's important not only to save for retirement,

but to know what kind of retirement you're saving for.

One thing is almost certain: Your retirement won't look like your parents'

retirement.

Some of the changes are already well-known. Tomorrow's retirees will

need to depend more on their own savings to fund retirement. Comfortable

pensions will be fewer, and retirees won't be able to depend as much on

Social Security. Participants in the Federal Employees Retirement System

will have to rely heavily on the performance of their Thrift Savings Plan

investment.

Future retirees also will live longer than their parents will in retirement.

Years ago, a person retired at 65 and was dead within a few years. A man

retiring today at age 65 can expect to live at least another 15.9 years

longer, while the life expectancy of a man retiring in 2020 will be 17.6

years more, according to the Census Bureau. A woman of 65 today can expect

to live another 19.5 years and 20.6 years by 2020. On top of that, many

workers retire before age 65, meaning even more years in retirement.

What's less well understood about this increased longevity is its implications

for retirement. It's not just the fact that you have to find the money to

pay for those additional years. It's how you want to live those years. When

jobs were more physical and retirement was brief, the rocking chair probably

looked pretty good. But many people don't want to spend 20 or more years

sitting in a rocking chair. How will they fill those hours?

A person wrapped up in their work may not have cultivated hobbies or

outside interests during their working years. One piece of advice Filangeri

offers is to "practice" at retirement. Start doing some of the things you

think you might like to do when you're no longer employed, such as gardening,

volunteer work or writing.

Here's another implication of longevity. People often plan to leave

money to their children upon death. But what happens when people live to

be 85, 90, even 100? Their children may well be retired by the time they

inherit. Parents may want to consider giving more during their lifetime,

at a time when their children may be more in need of the money, and the

parents can enjoy watching the benefits of their gifts.

Employment is another changing aspect of retirement. Retirement in the

future may no longer be a matter of quitting work cold turkey at a particular

age. Retirees may want to start their retirement years by cutting back gradually

on work. For some, this will be a financial necessity. But for others it

may be an emotional and intellectual necessity. They find work an enjoyable,

creative, life-affirming endeavor. This may mean changing careers, perhaps

a less well-paying one they couldn't afford to pursue when they were younger.

Or they may volunteer their time and expertise. As a consequence, retirement

may be less a single abrupt event than a transition into a new stage of

life.

The Social Security system is accelerating this changing view of work

by pushing back the retirement age at which one can collect full benefits.

Besides living longer, tomorrow's retirees will be healthier. Again,

this has dramatic implications for one's vision of retirement. Healthy retirees

are more active, more apt to travel and better able to continue to work

if they wish.

All of this means that tomorrow's retirees need to think about not just

the financial aspects of retirement but about the meaning and quality of

their retirement years. Retirement for them will no longer merely be the

absence of work. It will be a whole new stage of life.

—Zall, Bureaucratus columnist and a retired federal employee, is a freelance

writer based in Silver Spring, Md. He specializes in taxes, investing, business

and government workplace issues. He is a certified internal auditor and

a registered investment adviser. He can be reached at miltzall@starpower.net.