Today’s Pre-Retirees: Financial Planning with a Contingency Plan

Financial planning with a contingency plan is a requirement for all those who expect to retire at some point. The demographics of retirement and a ‘retired person’ is rapidly changing worldwide. Over the past 200 years, there have been remarkable changes in health and wealth around the globe. Now, there is a converging demographic between countries, thanks to world aid and trade, and technology. Human life expectancy is increasing; in just the United States, thirty years have been added to our life expectancy over the past 100 years.

Retirement is no longer viewed as winding down one’s life like it was in the 1950s. Today’s pre-retirees are making plans for their second phase of life. According to Age Wave, the nation’s foremost thought leader on issues relating to an aging population, today’s pre-retirees view retirement as an ‘Aspirational Life Stage’:

• 20% plan to ‘wind down.’
• 23% plan to continue working at least part-time.
• 57% think retirement will open a whole new chapter in life as they reset their expectations and priorities and plan for their future.

Source: Merrill Lynch/Age Wave “Americans’ Perspective on New Retirement Realities and the Longevity Bonus” Survey, 2013, General Population

The Study Continues

This same study reveals that during retirement, personal well-being, contentment, fun, and happiness increase and anxiety decreases. The top objectives of pre-retirees include:

1. Refocusing on relationships with family and friends.
2. Finding an ‘encore’ job.
3. Continue learning (many intend to take classes or obtain another degree).
4. Improving their health and fitness
5. Rediscovering hobbies
6. Enjoying liberated leisure
7. Living with purpose and giving back to others and society

The good news is that humans are living longer and that all of the above objectives are possible in retirement for those that plan, have good health, and the financial resources when they retire. The ‘Boomer Generation’ has the greatest outlook for long life, since they will outlive previous generations by almost 40%, compared to their great-grandparent’s generation.

The Bad News

The bad news is that having regular employment, good health, and the premature depletion of retirement assets can deter anyone’s retirement plan. Regardless of intentions to retire at a later age compared to previous generations (age 69 or into their 70’s), unplanned events continue to contribute to earlier retirement, despite even the best retirement planning. The pre-retirement generation faces circumstances that many of them didn’t anticipate:

• Increased Longevity: Living longer but with growing healthcare costs for supplemental insurance outside of Medicare.
• Economic Instability: A rocky economy and volatile stock market as they enter retirement or while accumulating retirement assets.
• Failing to Plan or Lack of a Plan: Not saving enough to offset the disappearance of pension payments for their entire life. 42% with no retirement savings and 38% have less than $100,000 in retirement savings. 

Source: Insured Retirement Institute “Boomer Expectations for Retirement 2018,” April 2018 https://irionline.org/resources/resources-detail-view/boomer-expectations-for-retirement-2018

Financial professionals can help Americans ‘get on the right track’ when they ‘advise’ and align clients’ expectations with realities. This same research reveals that financial professionals shouldn’t only offer ‘Retirement Plan A’ that intends to cover thirty years or more, but address that clients may need to resort to ‘Plan B.’ 

A financial advisor’s job is to additionally provide clients with an adjusted contingency plan full of options. If you need financial planning with a contingency plan, now is an excellent time for us to plan for ‘Plan B’ before you enter retirement.

Additional Disclosure: These are the opinions of the author and not necessarily those of the Registered Investment Adviser or Broker/Dealer, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.

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In Conclusion

As a retirement income specialist and 38-year veteran of the financial services industry, August H. Velten understands what his clients need in order to enjoy a comfortable retirement. Augie is a former instructor for the Life Underwriter Training Council and once occupied the legislative seat for the Maine Association of Life Insurers. At August H Velten & Associates, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!