While playing nine holes of golf with a friend the other day, the conversation turned to retirement and, specifically, what retirement looks like now as opposed to when our parents retired. Much has changed in the last generation or two; pensions have largely disappeared, the future of Social Security is a matter of debate and the costs of healthcare seem to just keep rising.
However, the news isn't all bad! Along with an increased life expectancy for most Americans, physical activity is on the rise and many can look forward to a healthier, more active retirement. Here are 7 of retirement plan advisors' top trends in retirement as indicated by research from the University of Michigan's Retirement Research Center.
1. The Rise of Bridge Jobs and Financial Strategies
Traditionally, workers would put in several decades of full-time employment before entering full retirement. Today, more people are choosing to go down to lower paying positions in their 50s, holding these so-called "bridge" jobs for a few years before they enter full retirement. For many, bridge jobs come with different expectations and attitudes than do traditional, full-time jobs, which in turn has influenced workplace incentives and loyalty.
2. An Increase in Rates of Semi-Retirement
With the decrease in pensions and an increase in (forced) early retirement, many retirees continue to work part-time well into retirement. Research from the University of Michigan indicates that the proportio of part-time workers ages 60 to 65 has risen by 15 percent since 1960, and by more than 10 percent for those ages 65 to 67.
3. Less Control Over Retirement: Does it Affect Wealth Planning?
Though the government has attempted to end age discrimination in hiring practices, workers in their 50s and 60s are more likely to be laid off, forced into early retirement or passed over by hiring departments. The economic downturn of 2008 exacerbated this problem, and as a result, many older workers have less control over their retirement.
4. Ask Your Retirement Advisor About Delayed Retirement Credits
Older workers also tend to have more flexibility; when it comes to taking retirement benefits like Social Security, prolonging working life by a few years means added savings and increased disbursements. Plus, the demise of the pension system means fewer age-based disincentives to keep working, so employers aren't as likely to encourage workers to retire at age 65. Instead, older workers can choose to take disbursements from age 62 to age 70.
5. Wealth Strategies: The More You Make, the Longer You Work
Though it may seem paradoxical, studies indicate that higher paid workers tend to keep working longer. In fact, the full-time employment rate for workers ages 65 to 67 on the top end of the pay scale has been increasing since 1990.
6. Lower Pay and Fewer Hours Means Delayed Retirement
For workers who've spent years working in part-time or low paying jobs, the option to retire comfortably just isn't available. In order to make up for lost wages, these workers tend to keep working part-time until age 70 and older.
7. Strategic Financial Planning, Retirement, and the Stock Market
Research also indicates that factors like the stock market, inflation, and the housing market don't have as much impact on retirement as conventional wisdom may suggest. While a high inflation rate tends to correlate with a higher retirement rate, conditions in the stock and housing markets have little bearing on retirement, other than for those in high tax brackets.