As Baby Boomers we are extremely fortunate. Relative to previous generations, we have been blessed with an endless selection of places to go, things to do, things to have and things to be. We can do things and go places that our parents could only dream of.
At the same time, we have been given the gift of time to enjoy this lifestyle. Significant medical advances, careers that are less physically demanding, and enhanced knowledge of and access to fitness, nutrition and hygiene have all contributed to the gift of extra years, maybe even decades.
However, the real gift is not just these extra years, but that they have been inserted into the middle of our life, when we have the desire, energy and health to pursue meaningful activities. A testament to these bonus middle years is the frequency with which we are reminded that age 70 is the new 50.
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Don’t get me wrong, we will still be faced with the challenges of old age; it is just going to take a whole lot longer to get there.
While we have much to look forward to, we cannot ignore that these blessing also come with a host of associated financial challenges. We have identified the 10 greatest of these challenges
- Financing our desired lifestyle. We have become accustomed to a lifestyle that far exceeds that of previous generations. We must understand the annual cash flow required to support a lifestyle we are unwilling to sacrifice. We need to know and reach our savings target before we give up the security of our pay cheque.
- Financing a longer life. These bonus years in the middle of our life mean that our desired lifestyle must be funded for much longer than in any previous generation. Relying on outdated rules of thumb for retirement planning is extremely dangerous.
- Avoiding expensive distractions. With so many choices and options, we can easily become distracted from the responsibility to defend our financial future. It is not uncommon to take a detour that significantly reduces our accumulated savings. These distractions will eventually prevent us from accomplishing the things that are most important to us. We need to be very clear about what is on our “Must Do” list and live our lives in accordance with that list.
- Assuming responsibility for your pension plan. Previous generations relied on their employer to provide a lifelong income, make all of the investment decisions and assume responsibility for any mistakes made along the way. Unless you have been a long-term employee of a government agency, you have been forced to assume total responsibility for these critical risks. Never before has a generation been left so alone to care for its financial future.
- Learning strategies for growth and income. Faced with unprecedented volatility in the stock market and record low interest rates, managing your savings and converting them into a reliable retirement income has never been more difficult. Indeed, strategies that served you well while you were accumulating your savings suddenly work against you when you start to withdraw an income.
- Thriving in a bear market. The investment strategies that served us so well during the 1980’s and 1990’s are now failing us miserably. Many investors look back in dismay at the lack of progress in their investment portfolio over the past decade. They are just now beginning to realize that new investment approaches and products are required.
- Supporting adult children. Economic and social changes are making it more difficult for many of our children to find their place in society. Often we find them requiring assistance far longer than planned. This has become so prevalent that the acronym ‘KIPPERS’ has been developed: ‘Kids In Parents’ Pockets Eroding Retirement Savings’.
- Supporting elderly parents. We are not the only ones that are living longer, so are our parents. Unfortunately, their extra years have been tacked onto the end of their life. We are faced with the potential responsibility of providing them with physical, emotional and financial, support. We need to be prepared for the challenge of being sandwiched between the responsibility of caring for our adult children and for our parents.
- Coping with loss of job security. Our world is highlighted by commoditization, rationalization, digitization and globalization. Life-long job security and pre-planned retirement are no longer the norm. Large companies and even entire industries are disappearing or being relocated overnight. Over 60% of those who retired last year did so unwillingly, in response to situations that were outside of their control. We need to continue to hone our skill sets and remain flexible to alternative employment opportunities if we have not yet fully funded our retirement nest egg.
- Planning for a meaningful and satisfying retirement. Financial issues will be the least of our concerns during the second half of life. We have become known as a society that relies upon our careers to provide our identity and define our relationships. Unless we plan for the future, we risk boredom and loneliness. While medical advances have extended our lives, unless we take care of ourselves through proper exercise and nutrition, ailments such as diabetes, arthritis, dementia and osteoporosis may take their toll on our enjoyment of life. Most of us have spent more time planning our last two-week vacation than we have spent planning the last 30 years of our life. We need to start planning what we will do and who we will do it with once our working years are over.
Previous generations could safely ‘wing it’ through their retirement years. They financed a few years of rewarding leisure before declining health and the aging process took their toll. This traditional thinking is not enough to conquer the many challenges we face. Getting the most from our lives requires detailed planning; we need to carefully consider what will provide the greatest level of happiness and fulfillment. We then need to carefully co-ordinate and direct our resources to live intentionally to achieve the things we really want. The planning tools we have developed have been designed to help you do just that.
Baby Boomers have redefined each phase of life as they passed through it. Retirement will be no different. In fact, it has been suggested that this generation will be best remembered for how it handled the second half of life.