Warren's Wisdoms- That Was Then... 9/2/2005
That was Then, this is Now � who knows what Will Be?
Many of you are probably kicking yourselves for having missed the American Institute of CPA�s retirement planning conference this past June but fortunately, I have read through the proceedings and have a thought to share. The keynote speaker, CPA Michael Stein from Chicago, pointed out something that I guess we have all probably known for some time � that retirement is different now than it was for member of previous generations.
In the past, according to Michael, people were inclined to work as long as they were physically able, then retire to a life of sitting & resting. Early in my career I did some work in the automobile industry and I remember a GM engineer telling me � quite proudly, in fact � that GM had a way of using up its professional staff, relating that the life expectancy of a retired GM executive was just 5 years. Think back on older people you know and try to remember how long they worked and for how long they were retired. You may find that � whether they were with GM or not � Michael is probably about right.
Here�s how he describes the then/now changes: People are taking longer to educate themselves than they once did, they are working fewer years than they once did and they are living longer (and being retired quite a bit longer) than they once did.
His statistics:
One comment that I especially enjoyed was his definition of the early years of retirement as �A second childhood without parental supervision�.
One of the classic rules of thumb for financial planners has been to assume that people will spend less money in retirement than they did while working � less need to update their business attire, don�t have to park downtown anymore, not going to be going out to lunch every day � that sort of thing.
My own experience in working with retired clients has generally been much closer to Michael�s premise than that old rule of thumb. People are retiring at about the same age as before but are much healthier now than in the past, so are more interested in pursuing their passions & dreams. Their children are better educated and more mobile, so travel to visit family has increased noticeably. Speaking of travel, except for the slowdown following 9-11, people are more easily able to go wherever they want � it has become, after all, a global society.
What does this mean for those of us in the workforce now? It means that we�ll have to plan more carefully for our retirement years, probably having to save more & invest more wisely. It also means that we�ll have to quit thinking in terms of a retirement annuity providing a fixed income stream for life. If the early years of retirement are going to involve more travel or the purchase of a retirement home, or both, it�s obviously going to cost more. Once we settle into retirement, expenses may level off but this time of stability will quite likely be followed by a period of deteriorating health during which medical costs may rise.
None of us knows what the future holds, so all we can do is plan as well as we are able and try to remain flexible so we�ll be able to face whatever life manages to throw at us.
In the future . . .
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