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Retirement Lifestyle
Boomers Pioneer a New Kind of Retirement
By Dena Frenkel
Financial Advisor, Ameriprise Financial Services, Inc.
Even as they age, baby boomers continue reshaping modern life. From rock and roll to botox, signs of their innovative (some would say rebellious) spirit are still coursing through the American landscape. And now, it’s retirement—what it looks like and how it’s financed—that will never be the same.
Because pensions and other employer-sponsored retirement plans are becoming a thing of the past, boomers are having to find new ways to finance their golden years. In the process, many in the “sandwich generation” face the simultaneous challenges of supporting their college bound children and their aging parents. All must deal with unrelenting increases in health care costs, and longer life spans1 are extending the length, and therefore the cost, of retirement. It’s no wonder many boomers are anxious about how to ensure a comfortable future.
The youngest boomers turn 41 this year; the oldest have already turned 59 ½ the age at which they can begin taking withdrawals from their retirement accounts. On average, they plan to retire at age 64, (according to an Ameriprise Financial survey, conducted by Roper Public Affairs Group of NOP World in November 2004) which means the first wave of boomers will start to retire in five years though the very definition of retirement is changing. Boomers say they plan to work in some capacity in retirement. As with most shifts in lifestyle, the affluent among us will lead the way.
A survey2 of affluent adults, (who are generally thought of as people who have $100K to $500K in investable assets), conducted in 2004 reveals a huge contrast between their vision and more traditional notions of retirement:
For affluent, the word “retirement” does not signify a retreat or withdrawal. Rather than believing retirees are too old to learn or that retirement is a depressing period of life, 90 percent of them see retirement as a new phase of personal growth and development.
The “ideal” retirement is a productive one. Nearly eight in 10 want to work at something they enjoy. Their ideal combines working for enjoyment with family time, activity, travel and financial security. Two-thirds are planning to stop working in stages.
They are twice as likely to envision their later years as striving for a dream (71 percent) than trying to avoid a nightmare (29 percent). They look forward to stepping into this new phase of life.
Age is seen in a positive light, including more time to enjoy themselves (51 percent), wisdom (38 percent), a time for helping others (27 percent), for being a good role model for younger people (21 percent), for being free from financial worries (18 percent) and for closer ties to family and friends (16 percent).
There are gaps, however, between boomers’ retirement ideals and their expectations of the reality. While one in four feels “very confident” about their ability to financially achieve their ideal retirement, 52 percent feel only somewhat confident in their ability to prepare financially for retirement. Most (72 percent) believe they will outlive their retirement savings.
Three out of four surveyed say they could learn more about retirement if they talked to others, yet most do not do so. As it turns out, they don’t know what they’re missing. The study revealed significant benefits associated with consulting a qualified financial advisor.
Those who do feel they are better prepared for retirement and report more positive feelings about this phase of life. For example:
Better financial readiness
Affluent boomers who have received professional financial advice have almost twice as much in retirement savings than the unadvised. Expectations for financial need in retirement are more in line with current earnings among the advised group compared to the unadvised. The gap between expected financial need during retirement and current savings levels is three times as great among boomers who do not consult professional planners. This gap may be unrealistically large due to lack of experience in forecasting future needs without professional advice. (Keep in mind that working with a financial advisor does not guarantee investment success).
Greater peace of mind
Those who seek financial advice report having more positive ideas about aging, are more confident in their ability to prepare financially for retirement, more likely to spend without worry and to travel abroad than those without financial advisors. Fewer of the advised reported anxiety, uncertainty and fear when imagining retirement.
If you are concerned about the gap between your retirement expectations and your ability to afford a comfortable retirement, consider seeking help from a qualified financial advisor. A financial advisor can help you best prepare for retirement and help you find a measure of peace of mind along the way.
1 The study was commissioned by Ameriprise Financial and conducted by Roper Public Affairs Group of NOP World.
2 According to Congressional Budget Office (CBO) estimates, Americans in their 60s can typically expect to live another 20 years past retirement age.
This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.
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