June 5, 2006

Not your parents' retirement

By Heidi R.L. Koler

As expected, the baby boomer generation is breaking the norm again, this time by changing their approach to retirement altogether. Not only are they living longer and healthier lives, but their retirement will look much different than that of their parents. Ameriprise Financial took a look at this trend and conducted a study entitled “The New Retirement Mindscape” creating a ‘‘comprehensive new framework to help people plan for their retirement dreams.”

How are retirement dreams different than goals? Its all about the retiree’s mindset leading up to retirement through the retirement years. According to Ken Dychtwald, PhD, a leading authority on baby boomer lifestyles, attitudes and behaviors, and a collaborator on the Mindscape study, ‘‘baby boomers are probably well aware of the financial challenges that lie ahead, but few may realize what they will experience emotionally.’’

The study surveyed over 2,000 people ages ranging from 40 to 75 who were experiencing different points on their way to and through retirement. Those surveyed were asked to share the emotional aspects of what they were experiencing, and Dychtwald concluded “that retirement is a complex process made up of distinct emotional stages similar to other life transitions such as pregnancy or bereavement.” This process involves more than smart financial planning and the study identified five distinct stages of retirement as follows:

∫ Imagination (15 to 6 years before retirement) — Here retirement is still years away; however, people are starting to envision what retirement will look like; positive expectations are formed.

∫ Anticipation (up to 5 years before retirement) — «Those positive expectations continue and intensify and people get more serious about saving. As retirement nears however, a certain level of doubt and anxiety begins to set in as to how things will actually pan out.

∫ Liberation (day one of retirement through the next year) — This period is one of great enjoyment and hopefulness, and Dychtwald refers to it as the “honeymoon phase.” Now, people are able to connect with family, pursue hobbies, travel and in general, relax.

∫ Reorientation (two to 15 years after retirement) — Here retirees often rearrange their priorities. They often discover retirement is more challenging than expected. Now is the time to reinvent one’s self.

∫ Reconciliation (16+ years after retirement) — In this stage, retirees experience contentment, acceptance and rest. Relaxation returns and retiree’s often renew their interest in hobbies and other pursuits. Here the focus is often leaving behind financial and emotional legacies for loved ones and charities.

The study found that retirement requires more than just money, it needs continued engagement and purpose. In other words, there are real needs in retirement that are often overlooked. According to Ameriprise Financial’s Chairman and CEO Jim Cracchiolo, “the insights developed in this research will help our advisors better understand the retirement experience, allowing them to work more effectively and with clients to develop a stage-by-stage emotional map of retirement, and create a plan to make each stage more fulfilling.” This preparation will help clients become what Ameriprise Financial calls “Empowered Inventors” when they retire, meaning reinventing themselves with new interests and doing what it is that the baby boomers do best — living life to its fullest!

Heidi R.L. Koler, M.S. is a financial advisor with Ameriprise Financial. Holding her Series 7, 66 and PA, WV and OH Life, Accident and Health Insurance Licenses, she is a combination stockbroker and insurance agent. She is a native of the Ohio Valley and is a graduate of Carnegie Mellon University. Currently, Heidi’s focus is helping people in the Ohio Valley get on track for their financial goals. She can be contacted for further information at 740-359-0059 or via email at heidi.r.koler@ampf.com.