The concept of the traditional retirement is dead. It's finished. It's over.
The very idea of working and then saving as much as possible so you can have a life of leisure during your golden years is as quaint as a horse-drawn carriage.
Granted, as we get older, most of us will have a season of life where we will no longer work for a paycheck. This will occur because we either want or have been forced to stop working.
Today the majority of Americans expect to do some sort of work in their "retirement" years — that is, those years after they've left their first career. A recent study from SunAmerica Financial Group found that 72 percent of people want to continue with some sort of work, either for financial reasons or to meet some other need.
But as a financial advisor for 25 years, I've witnessed a profound change in the way most of us view retirement.
Back in the 1990s, the discussion was all about retiring as soon as possible. The stock market was on a tear, and it seemed easy to make money.
Investment companies were running ads that made it seem like any investor could become rich and live a life of luxury and comfort. I recall one ad that made it appear as though you could make so much money day trading that you could buy your own island.
Twenty years ago, people in their 60s and 70s who were still in the workforce were actually looked down upon. Clearly, they must have done something wrong or they would have already retired.
Then came the dot-com bust, 9/11, a recession and a bear market that wiped out almost half the value of the broad stock market indexes. People who were planning on retiring early had to rethink their plans. And just about the time the economy had recovered and they were again going to retire, the Great Recession hit and, perhaps permanently, changed the investment landscape.
The financial meltdown of 2008–2009 was not only devastating to many people's portfolios, it seems to have changed our way of thinking, too. Many retirees had to either alter their standard of living or seek some sort of employment. And many soon-to-be retirees began to question if retirement was really what they wanted.
I certainly like to help people get to the position where they have the financial resources so that work is an option and not an obligation. Financially speaking, being at a place where one doesn't have to rely upon one's labor to make ends meet is wonderful. But nowadays, just because someone has the resources to retire doesn't mean he or she will.
Those facing retirement today "seek a greater sense of purpose, more intellectual stimulation and increased social engagement and fulfillment," concluded a study by the Harvard Institute for Learning in Retirement.
Apparently, the economic realities of our world have stirred up a desire for meaning over money.
Can you imagine how different our world would be today if Bill Gates retired as soon as he had saved enough money? Or if Steve Jobs had quit working after his first home run invention?
Most baby boomers simply do not want the retirement of their parents. The idea of having nothing on their calendar day in and day out is not appealing. They want to continue to grow and to learn and to share their lives with others. They want meaning and purpose.
The planning I do with people approaching "retirement age" today is quite different than it was 20 years ago. Today, much of the planning we do is focused on different periods in life. It's still somewhat contingent on good health, with planning in segments of three to five years.
Some people continue working full-time or as consultants, while others enter entirely new fields. Still others spend their time caring for an elderly loved one or taking care of their grandkids.
Unfortunately, most of the retirement-planning software programs out there are based upon an outdated model of retirement: Save for a certain amount of years, and then use that money each month until death.
Most of us will actually have a retirement where our income needs will vary from season to season or segment to segment. For that reason, the last five years in retirement will look nothing like the first five years in retirement.
Rather than thinking about quitting your job as soon as possible so that you can retire and slowly decline, think about this next chapter of life as a refocus. It's an open-ended ticked with numerous stops along the way, a time of recreation, with growth and the opportunity to learn.
Having a solid financial plan to help you thrive during these years is crucial. But rather than focus on replacing your income so that you can live on a fixed income the rest of your life, plan your finances so that they will help you be all that you were created to be.
Maybe that means never working another day in your life. But for more and more people, that just won't do anymore.
— By Scott T. Hanson, certified financial planner and senior partner and founding principal of Hanson McClain46466