We’re in an era of The New Retirement, which is a mindset and a necessity, considering the unique factors that face present and future retirement outlooks.
It wasn’t that long ago when people worked until age 60, then retired and collected a pension. But the dynamic has changed tremendously in the past 15 years.
Now, workers may be forced out of their jobs while in their 50s and 60s, which is enough of a strain, but when you consider that many people have their children at a later age than prior generations, that can squeeze the time they have to prepare for retirement when they also face their kids’ college expenses.
If you’re going to be in your 50s when your kids go to college, it’s essential to prepare well for your retirement. That’s one of the biggest New Retirement challenges.
Here, we help you face The New Retirement with some smart steps:
Figure out what you’re living on now.
Very few people do this, since it may be daunting to face the actual amounts you’re spending in your current lifestyle. In the old days, people lived according to their budgets, but now that is rarely the case. But knowing where your money goes each month is critically important in helping you configure what you’ll need to live well in the future.
Accept that we are all living longer.
And living longer puts more stress on your assets. 20 to 25 years ago, the average life expectancy after retiring from a job was 10 years. Now, if you make it to 60, there’s a good chance you’ll live to 90. You’ll need your retirement money to live comfortably during your later years, perhaps 20 to 30 years longer. If step 1 shows you what you’re living on, then step 2 has you face what can be a sobering amount needed to support yourself in your retirement.
Think about the benefits of working.
A number of studies show a correlation between how long you work and how long you live. While working, you’re more engaged, working may delay Alzheimers, and being part of a social group at work is proven to be a health benefit.
People who are forced out of their jobs early on find that job availability is limited, and that the income available in new jobs may be less. Many retirees, including people in their late 50s, are having a hard time finding work that pays what they made before. This reality shapes the New Retirement mindset and illuminates the need for dedicated retirement planning now.
Think about what you’d like to do while saving for retirement.
The new normal of retirement is the fact that many retirement-age Americans continue to work and plan to for some time, even if only part-time. Given the health and wellness benefits of remaining in the workforce, an end to your current job may be the time to engage in an entirely new career path, one that lets you leverage your experience and skills. You may experience great happiness in this new job, one that also allows you greater possibilities of investing more in your retirement accounts as you maintain your lifestyle. Many people report a satisfying ‘Second Act’ in their careers, which benefits life satisfaction.
Adjust your mindset when it comes to your kids’ education.
If you’re putting your kids through college while you’re in your 50s, facing the high costs of college education (and supporting kids’ extra financial needs for food, clothing, and other expenses) you’ll have little time to prepare for your retirement if you make the mistake of only starting your retirement plans once the kids are through school. And we include in this the temptation to spend a lot of money before the college years on private schools, expensive camps and other expenses that you may see as preparing your kids for a successful life in the future.
If you invest in these things to the detriment of your retirement planning, you may be among those who had to declare bankruptcy because paying for college and their living expenses overwhelmed them. It may seem counter-intuitive, and this is a key to the New Retirement, but you’ll need to adjust your priorities and put your retirement first. If you’re more solvent in the future, you can help your kids to their more successful life.
Prepare for what the economy does.
Think about the many people who were putting their kids through college when the economy went south a few years ago. Again, many faced bankruptcy, and many struggled through an essential downgrade of their lifestyle in order to invest in their retirement funds. We have no idea what the economy is going to do in the coming years. It’s essential to prepare for the unknown, building your retirement funds to help you weather any dip (or freefall) in the economy.
The New Retirement raises your retirement preparation priorities.
Simply put, the New Retirement is raising your retirement preparation in your priorities, and not making the regretful mistake of putting it off until the kids are through school. Because you have no idea what your career or the economy will be like when that time comes. There can be many demands on your money as you move into your later years, and we aim to help you think with a New Retirement mindset so that you do make the right decisions for your retirement and avoid costly financial mistakes that can lead to hardship ahead.
Listen to our podcasts on The New Retirement to hear more about what you need to consider when it comes to your time in the workforce, if you’ll have a Second Act, and paying for kids’ college educations while preparing for retirement.