Christian Farstad - Vancouver ScotiaMcleod

The definition of retirement as we know it is rapidly changing. The term retirement is a relatively recent creation and is ever evolving. The retirement of the future is going to be less structured and more personalized. It is going to be different than the past. We call this change the ‘New Retirement’. The work-life cycle for a normal person usually consists of separate time periods of education, followed by work, and then retirement with very little overlap of the three phases.

That concept of retirement is changing. We are evolving into something that we still call retirement, but this ‘New Retirement’ is different – and better. The ‘New Retirement’ is a phasing into retirement. Instead of three very distinct phases of life – education, work and leisure – we have all three at all life stages, just in different amounts. Education will still form the bulk of our time until our early 20’s, but it doesn’t stop there. As part of life-long learning, people are educating themselves throughout all their life stages. This can increase in later stages of life as people follow their interests and learn more about them.

Work will start part time in our teens, becoming full time in our 20’s with the phasing out stage starting at some magic unknown age (perhaps 55) where it then becomes part time again, perhaps well into your 70’s or 80’s. Leisure won’t just be left primarily for retirement years. Maybe you won’t have the interest or the health to do the things you wanted to do when you were 45, like adventure travel. Leisure will be spread out over a life-time rather than postponed until some distant future.

Why would you stop working if you enjoy what you do? If you are lucky enough to have found a career or have built a business that you enjoy, don’t let traditional opinion dictate how you spend your retirement time.

While you may not want to continue your primary career, perhaps you have an ‘encore career’ – a shorter second career in retirement that is what you always wanted to do. Maybe you love gardening, and you work 2-3 days a week at a nursery.

How does the ‘New Retirement’ affect your finances?

Individuals are changing employers more frequently than ever before. With employer changes, comes a reduction in accumulated benefits, as most benefits, particularly those geared toward helping people save for retirement diminish. Individuals will be more and more responsible for funding their own retirement income – defined benefit pension plans are being replaced by defined contribution plans, putting the onus (and risk) on individuals.

Life expectancy is longer – retiring at 55 means a retirement of 35 years. In fact, retiring at 55 or 60 with no further employment income could mean that your retirement period is actually longer than your employment period. This will mean that more money is required, and much more attention will need to be placed on the non-financial (how will you spend your time?) elements of retirement if one is to begin retirement anywhere near age 55.

Investment solutions are changing to help meet the financial challenges. Retiring at age 65 with a life expectancy of age 72, meant you only needed enough money for 7 years (and government and company pensions typically provided for most of the income needed). Retiring at 65 and living to 90 means 25 years of income is required, and the guaranteed pensions may not be as vibrant as they once were. This means retirees will need a growth component to their portfolios in retirement as well as pre-retirement.

Retiring at 60, with a life expectancy of 90, means that your time horizon for your portfolio is 30 years – very long. It also means that your ‘investing lifetime’ is likely not even half over by the time you retire. Retirement plans need to be more flexible than ever before, particularly for baby boomers. Boomer's have a lot of ‘what ifs?’ facing them and if they are not properly prepared, their plans will suffer.

How do we help you prepare for the New Retirement? Our Process!