Today's Retirement Journey
Forget those stereotypes. Stay active, stay involved, and prepare for what may be your best years yet
In another age, so long ago that IRA s and 401(k) plans hadn't yet been invented, a powerful, aging king named Lear decided to retire. He elected to divide his vast English kingdom among his three beloved daughters, who would take care of him in his old age. Talk about miscalculations. Two of the daughters turned on their father, while a third shipped off to France without her share of the fortune. Eventually, Lear was driven mad by the family feuding.
There's a lesson here for all of us, and especially for the 76 million baby boomers who will celebrate their 65th birthday over the next two decades. Despite their boundless goals and intensity, many of them will have problems, if perhaps less epic than Lear's.
For starters, after the Silicon Valley wipeout, 9/11, and a three-year bear market, nobody's kingdom is what it used to be. Although the financial markets have bounced back somewhat, Americans are hardly saving anything. Factor in the rising eligibility age for full Social Security benefits (age 67 in 2004), ballooning healthcare costs, and lower returns on investments, and a lengthy and luxurious retirement just doesn't compute. In a recent survey, only 39 percent of baby boomers thought they would have enough money to live comfortably once they retire--whenever that may be. And many seniors who can afford to stop working in their early 60s or sooner find they do not want the life of leisure.
"Retirement, as we know it, is dead," says Ken Dychtwald, president of the consulting firm Age Wave and author of many books on baby boomers and aging. "It's no longer an end. It's a turning point. A chance to take a break and then reinvent yourself." Retirement is morphing into a rich and enriching third act of work, education, and leisure. It still takes a good deal of money and planning to pull it off. But, as the boomers are about to prove, there is much more to having a life later in life than that.
A new start
"Rehirement" and "free-tirement" are two of many new buzzwords coined to describe this third stage of life. Retirement will be a cyclical blend of work (at what you want and on your own terms), education, and leisure, rather than a steady diet of Saturdays and a spot on the sidelines. This is as much a financial necessity as a psychological one. Very few people can afford to live well on a fixed income for 15 or 20 years. And a few extra years of earned income, even from a part-time job, can let your retirement savings compound over a longer period of time. "Drawing down even a little less upfront can have a huge impact on how long your money will last," says Harold Evensky of money managers Evensky, Brown & Katz in Coral Gables, Fla. Work for 10 extra years, for instance, and you will need one-third less to retire on. You'll not only be adding to your retirement account--you'll also be reducing how long the account will have to last once you retire.
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