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By Transamerica / May 27, 2016

The New Retirement: A Journey, Not a Destination

woman sitting on a suitcase

 

I always envisioned a retirement that isn’t a lot different from the retirement dream of many of the other women I know. It begins at a comfortable age of 65 – lasts for approximately 20 years – and includes a beach chair, vast blue ocean, and not a care in the world. You know the dream. Maybe you’ve even had the same one.

But the retirement landscape is changing and it’s no longer about simply arriving at the magical age of 65, flip flops in hand. Retirement is becoming more of a lifelong journey, not a destination. And it includes plenty of roadblocks and challenging topography along the way.

A Retirement Wake-Up Call: The Aegon Retirement Readiness Survey 2016, a global survey of 16,000 respondents reports that a number of factors will influence the shift in what is believed will become the new norm for retirement.

One of the key factors that is challenging the status quo is that people are living longer. You would think that would be good, right? Well it is a good thing, but it also means that with longer life expectancies comes longer years in retirement. It also could mean the need to address a potential frail retirement.

With people living well into their 80’s and beyond, there is the prospect that many people will require the need for long term care as they get older. According to the survey, one thing that people can do to help manage these costs is to insure against them. Yet most people fail to do so and rely on savings rather than insurance as a backup plan. Among the 32% of global respondents who even have a backup plan, just 19% have critical illness insurance.

Another way people can help mitigate health risks is by better managing their health throughout their adult lives, potentially reducing the risk of chronic health conditions in later life.

Compounding this problem is the longer number of years spent in retirement, the more money in savings you would need to live out those retirement years. Yet, many of us struggle to get started saving. Many only save from time-to-time. And savings habits change over time. However, habitual saving – the habit of consistently saving over time – is critical to achieving retirement readiness. Only thirty-eight percent of workers globally describe themselves as habitual savers.

The survey also finds that future retirees must take greater responsibility for planning their own retirement. Currently, many workers are neglecting to make any kind of financial plan for retirement.  Among those who are making financial plans, a large percentage are making poor choices with their retirement savings. The survey findings reveal a widespread reliance on savings accounts as a possible route to retirement income. With interest rates expected to remain low, there is a need for people to make better asset allocation decisions in saving for retirement.

Saving enough money for retirement may also require a change in people’s perception of what retirement means. Increases in longevity may dictate individuals need to work longer in order to adequately fund their retirement. For some, it may involve shifting from full-time to part-time work. For others, it may mean pursuing an encore career.

If I want my retirement dream to become a reality, it will require me to become a disciplined, habitual saver. It may also mean that I need to buy a hot-dog cart to accompany me on those trips to the beach.

 

 

Transamerica and its agents and representatives do not provide tax or legal advice. This material is for informational purposes and should not be construed as legal or tax advice. For legal or tax advice concerning your situation, please consult your attorney or professional tax advisor.

Source: A Retirement Wake-Up Call: The Aegon Retirement Readiness Survey 2016. This study is a collaboration between Transamerica Center for Retirement Studies® (TCRS) and Aegon Center for Longevity and Retirement. TCRS is a division of the Transamerica Institute®, a nonpro­fit, private foundation that is funded by contributions from Transamerica Life Insurance Company and its affiliates and may receive funds from unaffiliated third parties. For more information and full survey results, visit www.transamericacenter.org.

 

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