Getting ready for retirement really means being able to answer two important questions:
How will you pay for your retirement?
How will you spend your time in retirement?
At Modera Wealth Management, we work hard to help our clients answer the first question before they retire. Clients want to know whether they have the financial freedom to leave the workplace and we can provide answers to this.
But what about the second question?
While still working, many will say they are looking forward to spending time relaxing and waking up to an empty agenda. Some are just looking forward to leaving their jobs. Others answer the second question by saying they want to spend more time with friends and family or travel for a while.
While relaxing and spending time traveling may be enough for some, the reality is that retirement today is not the same experience for most as it was for our grandparents or parents. Today, retirees can expect to spend many more years than past generations living in retirement (think 30+ years), and will do so with greater health and capabilities (mental and physical). With many of our clients wanting to retire as early as age 55 or 60, they may need to plan for spending perhaps a third of their living years in retirement.
Is retiring early good for people? Does a “low stress” lifestyle help people live longer? Research is now showing this is often not the case. In fact, evidence shows that retiring early can have a negative effect on health and longevity. A study by the Journal of Epidemiology and Community Health shows that postponing retirement may delay the natural age-related decline in physical, cognitive and mental functioning and reduce the risk of chronic illness. This was found to be true even for those who retired for reasons associated with poor health. Researchers at Oregon State analyzed data from 2,957 people who retired between 1992 and 2010, and found that earlier retirement negatively affected longevity for most. For the people in this study, they retired fully and did not seek what many call a purposeful retirement – pursuit of a passion that gave meaning to their life during these retirement years.
What is “purposeful retirement” and why is this important?
Author and speaker Mitch Anthony has written much about the subject, and in his book The New Retirementality he discusses what it means to be a “successful retiree.” He likes to say that the successful retiree retires to something, rather than from something. They also find balance between vocation and vacation, and are plugged into meaningful pursuits. For many, he recommends the idea of having a career intermission, rather than a forever break from work. Taking a period of time to accomplish a few things on the bucket list, and then looking to establish new purpose in a volunteer job, employment in a new area of interest (maybe with less intensity or pay but with more meaning) or even starting a new business can work for many. Anthony recommends engaging in activities or work that “utilize your talents and challenge your brain.” He says those who feel a sense of purpose live longer and better in retirement. He also recommends keeping a good attitude regarding the aging process – and not joining the “moan and groan club” – complaining about the latest aches and pains. He notes that pessimism about aging often leads to expedited health decline in retirement.
New research shows many retirees are indeed now pursuing purposeful retirements. A third of those who retire eventually reverse retirement and return to work on either a full or part time basis. Economic necessity is not always the primary reason retirees are choosing to work again. People are also interested in the non-monetary benefits of the work they are choosing, including mental stimulation and continued social networks. As it turns out, they work again not for the money, but because they like their jobs.
Social innovator Marc Freedman founded Encore.org to help retirees looking for purposeful retirement. His original inspiration was in his work with the Big Brothers/Big Sisters program, where he noticed that a lack of volunteer mentors was the biggest challenge for the program, which matches adult volunteer mentors with young people who grow up in challenging environments. By engaging older people with a lifetime of experience in the program, he found the kids became even more successful, and both the kids and adults lived longer lives.
The rich and famous frequently find meaningful causes that are important to them. Bill Gates, Jimmy Carter, and Michael Bloomberg are examples of people who obviously don’t have the financial need to take on new jobs but have reengaged in encore careers. They have all done this because they want to make a difference in the world and believe they can.
But you don’t need to try to change the world to find purposeful retirement. Retiring to something can mean taking an active part in your grandchildren’s lives, working as a volunteer or taking up a new hobby that you enjoy. For many, it can mean working in a profession (part-time or full-time) that you have always wanted to pursue but never paid as much as you wanted or needed. Retirement with purpose means having the financial means to move from freedom from work to freedom to work and maybe do more in life that feels like you have greater latitude in how you spend your days.
While we work hard at Modera to help our clients reach their financial retirement goal, we also welcome discussions regarding your own ideas for retiring with purpose. How will you choose to spend your days once you have realized financial freedom?
Modera Wealth Management., LLC is an SEC registered investment adviser with places of business in Massachusetts, New Jersey, Georgia, North Carolina and Florida. SEC registration does not imply any level of skill or training. Modera may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements.
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This article is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this article are subject to change without notice based on changes in the law and other conditions.