There is no question that our concept of retirement is changing. There are different expectations between generations and genders. Even spouses may have different expectations. Have a look at this article by Peter Wouters for some interesting statistics.
Do you know what you want out of your retirement? There is a good chance that you only have a vague picture of travelling or spending time on a hobby. Is that how you will spend your entire retirement? Many people will be retired for close to 20 years. Some people may be retired closer to 30 years! Is it realistic to think that your retirement won’t evolve while you are experiencing it?
Just as your retirement is evolving, planning for your retirement should evolve. Each person’s financial situation is unique with everyone having a different mixture of income sources and expenditures that will change over time. A retirement plan that was created at 55 without evolving will probably not work at 65. Likewise, a static plan made at age 65 will probably not reflect the reality of age 75. Retirement planning is a process, not an event. The way we save for retirement must be flexible to meet changing circumstances while providing a stable and understandable framework with a clear purpose and rationale. Mindlessly saving in an RRSP that the bank talked you into is not planning for retirement. Are you sure that you are saving enough? Are you saving too much?
Sit down and think about your retirement assumptions. Is 65 really the best age to retire? Originally 65 was the age chosen by the Germans in the 1880’s to start a government pension. At the time, most people did not live past 50. Does retirement at 65 make sense for you 130 years later?
Do you think that you will require the same income in 20 years of retirement? It seems that after age 70, many people tend to start spending less. A trend that continues as they get older. Perhaps there is less travel, or there is no desire to buy the latest and the greatest gadgets. Was this potential change in spending considered at the beginning of retirement? Which is worse – to outlive your savings or for your savings to out live you? Do you want to save throughout your life only to have money near the end of your life that you will not be able to enjoy?
There are no easy answers to these questions and to complicate matters, our answers may change with our age and circumstances. By working with a third party, with an advisor, one can consider these and other questions so that retirement can evolve both before and after retirement.
If you have questions or comments, I would love to hear them.