January 24, 2006

A long retirement deserves lengthy planning

By Frederick Tromans

Retirement is different today than it used to be. But why shouldn’t it be different? Life is different. Take my family as an example.

As World War II ended, my father left the Navy Yard. From then until 1979, when he retired, he changed jobs once. Both of his employers were machinery manufacturers and his work, as a product development engineer, changed little, except for increased responsibility and technology. During his working years, most people expected to work until age 65 and then live in retirement for perhaps 10 years, drawing a monthly pension and Social Security. Fortunately my father beat the odds, living to the age of 89.

My son, at age 35, has changed jobs three times since college and has worked in three distinctly different professions. Like his contemporaries, he has almost no expectation of drawing a monthly pension that will last for his lifetime. Instead, he has participated in 401(k) plans at his various employers. Like most his age, he has very little confidence that Social Security will provide him a benefit like his grandfather received. Indeed, the Employee Benefit Research Institute shows that about 70 percent of today’s workers are skeptical that they will receive a Social Security benefit equal to what today’s retirees get.

These changes in funding retirement become more challenging as one considers how much longer people are living today. On Wall Street recently stated that a 65-year-old couple today have a 50 percent chance that one of them will live to be 90. And by the time my son retires, he could live longer than that.

Those statistics suggest that planning for retirement ought to be a high priority. However, EBRI’s survey shows that only 42 percent of workers have even attempted to calculate how much they will need to save to ensure a comfortable retirement. And 52 percent have less than $25,000 saved.

But retirement planning involves much more than money. When my father hit 65 and retired, his employer offered to set up a drawing board in his basement so he could work part time. Dad had no interest in that. He wanted to retire, not work.

Today, many workers retire from their career and then go back to work. Some choose to work because they must to make ends meet. Others look upon retirement as an opportunity to do something they always wanted to do. One friend of mine worked in marketing until he was eligible for retirement, then returned to school to get a teaching certificate and now teaches elementary school. Another left a career in insurance marketing and now sells real estate in a retirement community. Others become volunteers.

A retirement that might last 30 years deserves careful thought and planning. The keys to a successful retirement include:

■ Work: You need to work at retirement to have a happy one. That may involve a new job, a hobby or volunteer work.

■ Financial independence: Ken Dychtwald, an expert on aging, states that people who have sufficient means to support their lifestyle are happier in retirement. The power of compound interest dictates that people who start saving early for retirement and then let it grow will do better than those who wait. As you set goals for saving for your retirement, don’t forget inflation.

■ Physical health: As you get older, staying in shape may require a greater commitment, but doing so is a critical component in a happy retirement. Don’t forget to make provision for higher health care costs and the possibility of assisted living and/or nursing home care.

■ Relationships: Happy retirees report that whom you retire with is more important than where you retire. Just as you invest your money, it’s important to invest in friendships during your working years so that you can enjoy the earnings of that investment, as well as your financial investments.

■ Mental outlook: My mother is 93 years old. She is legally blind. But she is one of the most positive, enthusiastic people I know, and that has enabled her to enjoy her long retirement. Last summer she flew to Kansas City for a visit — by herself.

Like most other aspects of life, you will get out of retirement what you put into it. So start now. Whether you are a 20-something just starting out or someone looking to retire in just a few years, plan and prepare now. Don’t put it off one more day!