The Great Awakening

Once upon a time people retired at 65 with a reasonable expectation they could live out their remaining 12 to 15 years comfortably. Not anymore. So many today are anxious about just making ends meet, and they live in pretty nice neighborhoods too. Ask them to think of the future and they get even more anxious. The concept of retirement has changed. Stopping all gainful employment is becoming less common as more retirees continue to work part time to delay withdrawing from retirement accounts, cover healthcare expenses or supplement their desired lifestyle. Still there are those who are more affluent and better prepared for retirement. Even so, we are living longer and our retirement years are more likely to involve lots of activity; which costs money. This has challenged the way seniors determine their capacity to retire. Analyzing retirement readiness goes beyond simple arithmetic; plugging in account balances, a projected return, social security projections and an annual need. This linear approach gives only a rough approximation; at worst, a false sense of assurance. Part of a value-based approach to financial planning during one’s accumulation phase is examining if a person is optimally using their resources to support their core values, priorities and deeper desires for the next phase of their life. This prompts us to examine our spending and attitudes about money. An obsession with frugality may prevent individuals from experiencing the more meaningful aspects of life. Conversely, carefree spending can create constant stress, preventing one from securing financial peace or stability in their later years. Research has shown that Baby Boomers are spenders, accustomed to a lifestyle they often can’t afford once their earning power ends. Someone who has been earning $250k for the past ten years and living large may find themselves unable to support that lifestyle in retirement. Studies show that less than half of Baby Boomers have enough to meet their current spending demands. (Financial Advisor Feb 2012). Having said this, it can be understood that our spending and saving decisions either enhance or detract from our overall well-being today and tomorrow. People don’t want to retire into a state of being or feeling poor. They want to be able to feel a sense of security. To make this happen, there needs to be an honest discussion about appropriate expectations which involves determining how one’s savings will actually fund the “retirement” one is thinking about. Working with a retirement planning specialist can help people who are wanting to transition into retirement lay out a strategy built on realistic goals and plans.

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