January/February 2009

Retirement — A New Frontier
By Kathryn Hanson
Aging Well
Vol. 2 No. 1

A retirement revolution is underway in America. In fact, the word retirement no longer accurately describes this stage of life. According to Webster’s Dictionary, retirement means “to withdraw from one’s occupation or career.”

But rather than withdrawing, Americans in their 50s, 60s, 70s, and beyond constitute one of the most productive and robust older generations in history. Thanks to medical and social advances, Americans are living longer, healthier lives than ever before. With these additional years and energy, many older Americans are redefining retirement by staying actively engaged in the workplace and in the world at large.

Today, retirement is not a farewell event. It’s a journey that may have many stages, beginning ideally with careful planning. With or without a road map, the majority of Americans will have to decide eventually which route they’ll take in retirement. And they’ll need to consider both the financial and the social effects of their choices.

The good news is that they’ll find more options than ever before. An increasing number of people today who are nearing what was formerly perceived as the normal retirement age are continuing their careers either full or part time. Some are launching second and even third careers. Others are joining the growing number of volunteer organizations tailored specifically for seniors.

Why Work Longer?
The massive march of baby boomers into their 50s and 60s is changing America’s employment landscape. By 2010, one in every three workers will be at least 50 years old, according to AARP, which also reports that up to 40% of entrepreneurs in the United States are aged 50 or older. Meanwhile, more people between the ages of 55 and 64 are starting their own businesses, according to a study by the University of Florida.

But for many older adults, their financial wealth fails to match the new expectation of longevity, and that’s another trend keeping older Americans busy. Some haven’t saved enough to retire and recognize that Social Security won’t provide adequate income to support their lifestyles. For the average American, Social Security benefits replace only about 40% of preretirement earnings, according to the Social Security Administration. This percentage is lower for those in upper income brackets and higher for those in lower income brackets.

And recent changes to the Social Security system will require many people to work beyond the traditional retirement age of 65 to receive full benefits. With Americans living longer, the federal government has decided that only people born before 1942 can retire with full benefits when they reach the age of 65. The full retirement age rises to 66 for those born between 1943 and 1959, and goes up to 67 for those born in 1960 or later.

Another reason many people will need to work longer is that roughly one half of all American workers have no pension benefit, and many lack the savings necessary for a secure retirement, according to AARP CEO Bill Novelli. The organization boasts 35 million members aged 50 and older, one half of whom are actively employed either full or part time.

The soaring cost of healthcare is another critical issue for older workers, Novelli points out. Many people who want to retire early discover they need their jobs to keep their healthcare insurance or must work to pay their medical bills.

Retirement Fallout
But financial security isn’t the only reason so many older workers are remaining in or returning to the workforce. Surveys by the Employee Benefit Research Institute show an increased desire among Americans to work longer, particularly those with more education.

Working provides purpose, which itself plays a role in long life, according to Dan Buettner, author of the recently released book The Blue Zones: Lessons for Living Longer From the People Who’ve Lived the Longest. Along with a team of demographers and scientists, Buettner spent seven years studying places where people were living longer and better. The research, funded in part by the National Institute on Aging, found that people in four zones on the globe are most likely to see their 100th birthdays.

One of those places is Okinawa, Japan. There, Buettner explains, people live with a defined sense of purpose—ikigai or “the reason for which you wake up in the world.”

Too often, people exit the workforce without any plans for finding personal fulfillment. Especially for retirees whose jobs required traveling, public speaking, and broad authority and responsibility, stopping suddenly can plunge the best of them into nothing short of clinical depression. Their sense of relevance, involvement, and importance is gone. The ego is stunned.

While they may have prepared financially for their retirement and may be able to speak fluently about their retirement investments, they don’t have a clue about how they’ll spend their days. They may say they plan to golf, or travel in a new RV, but that falls short of what a true retirement looks like.

One reason is that retirement may last a long time. Figures from the Centers for Disease Control and Prevention show that the average American lives to the age of 78. White women have the longest life expectancy at an average of 81 years. Right now, the fastest growing age group in America is older adults over the age of 85.

With the expectation of a long retirement, people should carefully calculate all the effects of leaving the workplace. Many will miss the day-to-day stimulation and company of their colleagues and coworkers. Even for people who dislike their jobs, leaving that familiar routine is often felt as loss.

New Opportunities
For those who want to continue working, the opportunities are increasing. Some companies are beginning to offer phased retirement, allowing workers to reduce their hours or responsibilities while remaining on the payroll. Other employers are becoming aware of older workers’ value and accommodating them with innovative policies. Borders, The Home Depot, Starbucks Coffee Company, and others are utilizing older adult employees and enticing them with flexibility, allowing them to choose their hours and locations. Some employers even accommodate elders who travel by giving them part-time work in their vacation locations. The pay may not be great, but the flexibility is. Best of all, elder employees are valued, and they know it.

Volunteerism, meanwhile, is becoming a major movement among older adults, with dozens of organizations tapping into the interests, expertise, and experience of elders. The Peace Corps is actively reaching out to this group, increasing the number of volunteers aged 50 and older from the traditional 1% to 6% today.

Another option is Experience Corps, which operates in more than two dozen U.S. cities, matching older adults with youngsters to help improve their academic performance and life skills. The National Senior Service Corps, the Retired & Senior Volunteer Program, and the Senior Companion Program help frail older adults live independently.

Today, elders have so many choices that retirement has become an industry unto itself. There are books, Web sites, talk shows, retail companies, financial advisors, and life coaches all serving Americans who are moving toward or living in this new phase of life. Many of these ideas are the inventions of older adults aged 50 and older who have looked at their own active lives and decided it’s time to help redefine retirement.

Counseling Tips
Those entrusted with guiding older adults into and through the third age should encourage clients to engage in multiple levels of self-examination to help ensure a fulfilling retirement. Here’s some sound advice you can share:

• Ask a lot of hard questions. People often fantasize about quitting their jobs, but the realities of retirement are complex, ranging from the financial to the emotional. Older adults considering retirement should ask themselves many questions. At work, they should thoroughly consider whether they’ll miss the mental stimulation, their coworkers, or the comfort of a daily routine. If they are convinced they won’t, they should then ask, “How will I fill my days without this job?” and “Can I live the way I want without my regular paycheck, my bonuses, and my healthcare insurance?”

• Consult with a financial advisor. No matter how well individuals believe they have prepared for retirement, the risk of retirees outliving their money is very real. Elders should get an objective analysis from an expert about what’s financially feasible.

• Take time when making life-changing decisions. If possible, preretirees should take a month off work before deciding to leave their jobs. This will provide a chance to experience how they’ll handle free time. A trial period will also provide some insight into the potential effects on relationships with spouses, children, and friends.

• Don’t underestimate acquired skills and experience. Many fields and industries are recognizing that they face a brain drain due to the exodus of the aging baby boomer population. Older adults in or nearing retirement who want a new career can consult various resources, including the many books and Web sites dedicated to the subject. Another tip for career-conscious retirees: Keep networking.

• Outside interests and hobbies can play a large role in retirement. There’s potential for volunteering or even creating a business via specialized interests and hobbies. Before deciding whether to turn an avocation into a vocation, older adults should first consider the realities in terms of their finances, physical energy, location, etc.

• No one should assume that Social Security will cover all basic expenses. Government benefits will no doubt continue to be available, despite the well-documented problems of the Social Security system. But Social Security usually can’t meet all of a person’s critical needs. Individuals with questions about Social Security benefits should visit www.ssa.gov to educate themselves on the pros and cons of retiring at age 62 or waiting until their full retirement age or even beyond that point.

• Everyone should expect the unexpected. For example, more parents are getting hit by boomerang children who move back in as adults because of financial problems, divorce, etc. The old rule holds true, even in retirement: A sound financial plan should include a contingency cushion.

— Kathryn Hanson, former area director for the Social Security Administration, is senior Web editor for SecurePath by Transamerica, a service provided by Transamerica Retirement Management based in St. Paul, MN, which provides educational tools, guidance, strategies, and products for retirement-bound individuals.