The Definition of Retirement Is Changing

You're finally taking that trip you've dreamed about for years. Maybe you're spending some extra time with the grandkids before they grow up. Maybe you're investing your time in your favorite charity, place of worship or hobby. Or maybe you're simply choosing to keep working. Not because you have to, but because you want to. That's what's so wonderful about enjoying your retirement and giving "retirement" your own definition.

Odd as it may seem, the world of retirement today often includes some type of employment. People may choose to work through their retirement years for social involvement, for intellectual stimulation or for financial reasons.

In fact, nearly 40 percent of Americans 50-years-old and up expect that they will need to continue working during retirement just to maintain their lifestyles. Consider these reasons:

• Many retirees face higher than expected living expenses, like the costs of either caring for a parent or putting a child through college (and many retirees face BOTH sets of expenses at the same time).
• Other retirees have seen significant chunks of their nest egg eaten away by an ailing economy.
• Some may not have saved enough over their lifetimes to maintain the lifestyles to which they are accustomed.
• Retirees overall are living longer and healthier than ever, yet the cost of health care in our country is skyrocketing.
• The average retiree at age 65 has a life expectancy of another 18 years or more--and can expect to spend much of that in very good health. But there's still the challenge of paying for that healthy life.

In the present economy, that's proving a hard thing to do for some. Many retirees would no doubt agree that financial peace of mind comes from knowing you can pay the bills even when the stock market isn't cooperating. Times have certainly changed since the previous generation of retirees--many of whom had guaranteed benefits like either a retirement pension or Social Security to see them through their golden years.

According to one study, about half of all companies that offer traditional pensions are shifting toward 401(k)s. This change in guaranteed benefits--a process that started in the 1970s as more and more companies moved away from "defined-benefit" plans (like traditonal pension plans that guarantee income for life) to defined-contribution plans (like 401(k)s, which do not provide guarantees)--is a major reason why many people will have to work into their retirement.

According to the Department of Labor, in 1975, 29% of workers named guaranteed pensions as their main source of retirement income, while only 4% named 401(k)-type plans. By the late 1990s, those numbers had shifted to 17% naming guaranteed pensions as their primary plan and 21% naming 401(k)s.

And while 49% of retirees rely on Social Security as their main source of income, even those who can combine that with some kind of pension find that these monies only pay up to about 50% to 60% of their pre-retirement income. As a result, retirees are forced to rely on their investments and savings as never before. If they have been fortunate enough to be spared the ravages of a bear market, then they are more likely to be living the retirement of their dreams. If not, as many have, they are likely part of the rapidly expanding number of retirees who are working involuntarily.

Unfortunately, this trend is not likely to end anytime soon.

As the baby boom generation approaches retirement age--with boomers turning 50 at the rate of 10,000 a day--they, too, may find themselves facing the same dilemma as the current generation of retirees. Companies foresee a coming worker shortage that the much smaller Generation X will not be able to fill. The only solution that many see is to fill their ranks with current and future retirees, many of whom will have no choice but to continue working.

What this means for those not living their ideal retirement is that they may need to re-think their priorities and make some changes. Some may want to sell some of those luxury assets (like a vacation home or a boat) to generate some income. Or maybe even start a business. In some cases, retirees have taken advantage of programs with their companies where they can come back to work part-time in the jobs that they love or even become consultants.

And while many retirees face the challenge of having to continue working, hopefully, for most it won't have to be a chore. In fact, it could even be a chance at a second, more relaxed worklife that is just another part of what is ultimately a satisfying retirement.