A New Model for the Retirement Years

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Ruth L. Hayden explains the need for a new model of retirement centered around mental, emotional, physical and financial health for 90 plus years of living.

Ah-h-h-h! Retirement! The daily grind is over. Dealing with the office politics, the rush-hour traffic and the exhaustion is over. It's time to travel a bit. Get the workbench and the closets organized. Hit the golf course. Read that stack of books. See the grandkids. A-h-h-h-h! And then? Death.

This is the socially accepted retirement model, but, because of projected longevity, it does not work any longer. Some people are recognizing this, but instead of creating an entirely new model, they are simply reworking the old model. This reworking of the old model looks like this:

Financial planners need to start a dialogue for the purpose of forming an entirely new model. This model needs to have the goal of keeping our clients and ourselves mentally, emotionally, physically and financially healthy for a possible 90 plus years of living. That is the challenge.

As an 18-year veteran of the profession, this is my contribution to the dialogue: I am convinced that planning for retirement really begins with getting rid of the word "retirement" altogether. It is much more productive and, actually, more accurate to think of retirement as simply a developmental stage, much like other stages we have all gone through.

Three Developmental Stages

Adolescence to college to a first career is a developmental stage. This stage represents the first third of your life. This first stage is about rebellion, acne, a first kiss, cramming for tests, moving away from home and job interviews. Feeling enormous hope for the future while dealing with the fear of the unknown are two of the conflicting emotions present in the first third of life. "Retirement" at this stage means possibly contributing to a 401(k) plan; otherwise, it is pretty much a nonissue.

The middle third of life is about settling in a first home, establishing a family and building a successful work life. It is also about aging parents, empty nests and glass ceilings. It is about bills and more bills that pay for your lifestyle but do not get you ahead. This stage is about excitement, accomplishment and frustration. It is about learning where you have control in your life and where you do not. Retirement is an important goal, but with the daily busyness of life, it seems very far away.

The final third of life is what we normally call "retirement." This is where we need a new model. Remember the goal for this new model? The goal is to keep ourselves mentally, emotionally, physically and financially healthy for a possible 90 plus years of life.

The New Model.

This new model has a work life-a career- probably well into your 70s and early 80s. Your work life will change over time. You may retire from your first career at age 40 and move on to a second career that is more mentally stimulating but still pays your bills. At around age 60, you will probably change careers again. This career may be more of what you really enjoy, but it is still mentally challenging and still pays the bills. You might have yet another career change 10 or so years later that is less physically challenging but still earns some income and still makes you feel valued in the world. In other words, the last third of your life will be a series of "retirements," or career changes. As you get older, your career may not be as physically challenging. It may also not be as financially lucrative; however, you will not need to earn the same amount of money when you are age 75 as you did when you were age 40.

The old model does nothing to help you keep your brain alive, to keep you intrigued, to keep you interested in life, to make you feel needed and loved, to make you feel like you are making a contribution to society or to keep your finances healthy.

The financial or cash flow aspect of this new model is critical. For those of us who lived through the 1970s, today's inflation seems to be a nonissue. However, do not be fooled; it is an issue. Just think about a possible 30 to 40 years of living, without earning money, as even a low inflation eats away at the buying power of the money you have invested. Any of you remember the nickel ice cream cone and the three-cent stamp? That is inflation. Even low inflation over 30 to 40 years is significant. A career in "retirement" is essential for most people, not only because it will keep them mentally and emotionally healthy, but also because it will keep them financially healthy.

I describe this new model to my clients this way: The last third of life can be divided into three financial phases. Assume this last third of your life lasts 30 years. During the first 10 years, one wi1l still need to earn enough money to pay bills and to invest. In the next 10 years, one will be able to use at least part of the growth of that invested money plus some earned money to pay the bills. I tell my clients that when they get to the predicted last 10 or so years of their life, they need to give themselves permission to spend the money they have. They will need the money for their shelter and their health care.

If this model is going to work we professionals must be willing to encourage our clients to seek help from a career specialist in the first, second and, yes, even the third stages of life. This new model means that our focus, as professionals, cannot be as narrow as it has been in the past. We cannot simply focus on getting clients to put away money for retirement.