Avoid the retirement drift

Blogger and expert in the fields of aging and personal finance, Lee Ann Davies warns against a moving target retirement date.

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by Lee Anne Davies
May 13th, 2013

Online only.

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LeeAnnDavies
Have you adjusted your thinking and “75 is the new retirement?”  A lot of people I’m hearing from these days think their retirement will be starting much later than they anticipated.  Sure, freedom 55 is passé but more and more it seems that freedom 65 is unachievable too.  We keep pushing out the socially acceptable retirement date.  I suppose this approach takes some of the pressure off us to be prepared for our no-longer-imminent retirement.  However, without an approaching deadline we humans tend to be less motivated to achieve our goals.

By adjusting our thinking about the timing of retirement to a later date, we remove the urgency to take action.  Preparations for retirement such as working on decreasing expenses, reducing the use of credit and rethinking our investment style for the fixed income years will be delayed.  This means that if retirement sneaks up on us even at the traditional age of 65, we may be caught unprepared.  The risks of the ‘drifting’ retirement age include:

  1. Never really expecting to retire—it just happens to you one day whether you’re prepared or not;
  2. An unexpected family or personal crisis leads you to decide that your time is better spent not working even though you are unprepared;
  3. You don’t have “enough” money because you have not taken the time to understand what “enough” means to you, leaving you feeling financial insecure;
  4. Your sense of self-worth and personal-contribution takes a nose-dive because you have not built a life outside of work.

The baby boomer generation identifies strongly with its careers.  Many are not interested in leaving behind exciting work lives for unscheduled time in retirement.  There’s no urgency to change their behaviour if retirement is continuously delayed.  Even the federal government wants Canadians to retire later.  The changes to retirement entitlements include gradually raising the Old Age Security (OAS) age of eligibility and modifying the Canadian Pension Plan (CPP) to increase benefits for those who access this entitlement later than age 65.

I am not convinced that a lot of baby boomers will continue to work into their mid to late sixties, even if their financial house is not in order.  Late retirement is a social change that is probably more complex than meets the eye.  The baby boomers are currently witnesses to the aging process through the experiences of their aging parents.  This will result in a readjustment of priorities and delaying retirement, at least from the primary career, will become less appealing and increasingly unlikely.

Lee Anne Davies has worked as a consultant for insurance, wealth management, banking and financial education companies. She has a PhD in Aging, Health and Well-being and a Masters of Arts (MA) in Gerontology and Health Studies from the University of Waterloo and an MBA from Athabasca University’s Information Technology Management program.  She’s also successfully completed the Canadian Securities Course and the Professional Financial Planning Course. To read more from Davies, visit her blog Agenomics.

6 comments on “Avoid the retirement drift

  1. Welcome aboard, Lee Anne. Nice post. Of course I think you COULD make the distinction between retirement per se and what I call Findependence or Financial Independence. Nothing wrong with achieving findependence in your 40s or 50s even if you do plan to keep earning some income well into one's 60s!

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  2. I think the key in the valuable comments you make is that we need to live our life on purpose – versus drifting with no plan. I think the stats support the truth that a large percentage of people over 50 have no plan and also have little retirement assets – and so will just ignore the painful truth or, as you write, use the idea of extending retirement age as an 'excuse' to not do anything.

    On another front, I believe that within 20 years advances in medical science will radically extend healthy life spans. This will have such dramatic impacts that we will need to rethink the notion of "retirement" altogether. This does not mean we ignore saving, but it does have major implications to such things as the viabilty of pensions and the value of our "Human Capital".
    Cheers, Michael

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  3. Welcome, Lee Anne! Letting your retirement target drift aimlessly is one thing, but intentionally shifting it later as part of your plan is quite another. It's not a *bad* thing to delay retirement, so long as you're preparing for it realistically.

    "Preparations for retirement such as working on decreasing expenses, reducing the use of credit and rethinking our investment style for the fixed income years" should be part of anyone's financial plan, regardless of their target retirement date. Putting these steps off until "someday" isn't a problem of drifting dates; it's a problem of inadequate overall planning.

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  4. I think the key in the valuable comments you make is that we need to live our life on purpose – versus drifting with no plan. I think the stats support the truth that a large percentage of people over 50 have no plan and also have little retirement assets – and so will just ignore the painful truth or, as you write, use the idea of extending retirement age as an 'excuse' to not do anything.

    On the other hand, I believe that peoples healthy life spans will get much longer – so the idea of continuing to have employment/business income is also a good idea. A major problem is our notion that "retirement" is one block of time after work. Rather, in an age of radically extended life spans, spreading periods of retirement/leisure throughout life makes more sense.

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    • Except it's a myth that people are living longer after retirement. The life expectancy after 65 has only increased about 4 years since the 1940s when antibiotics were in their infancy and there were no cures for many cancers or heart disease. I also don't think boomers, especially the women, will live longer than their parents. I have had too many 50 something girlfriends die of cancer while their 80+ mothers are still alive and kicking, maybe it's the stress having short mat leaves and no such thing as work life balance when their kids were small that did it, who knows.

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  5. There's no doubt that advances in medical science means we will live longer in the coming generations. I can agree with the comment above that it's a myth that we are living longer and life expectancy has only increased minimally since the war. That stat in itself is very mesleading.

    I do believe that the reduction of credit as mentioned is the critical aspect of planning for retirement as the overall cost of that is always much higher than people think.

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