Ken Dychtwald: The Fourth Era of Retirement

Gerontologist, psychologist and author of 16 books, Ken Dychtwald foresees the “fourth era of retirement.”

The first era lasted about 100,000 years and ended in the early 20th century. During that era, people worked all their lives, no one considered that reality a  bad thing.

The second era of retirement began around the 1920s. Its crowning moment came wigth the passage of Social Security in the 1930s. Social Security had two purposes:

1. It served as a thin safety net for older adults in a period of economic frailty
2. With unemployment levels skyrocketing to 25%, Social Security facilitated retirement so that older people could be removed from the workforce to make room for the young

Then the third era of retirement developed during the 1960s and '70s when Americans began to think of retirement as the Golden Years of life. The younger you retired, the more successful you were perceived to be. Successful or not, Americans began regarding retirement as an entitlement.

Concomitant with this third era was the growth of longevity, whereupon the post-work period became a stage lasting two or three decades rather than two or three years.

According to Dychtwald, that third era, which has lasted a quarter century, is “fraying at the edges … and [is] coming to an end.” The modern retirement experiment is not working for most people. In fact, half the retirees in this country say they would rather be working. They would rather be working, but this is what they don’t want:

• Working full-time
• Continuing in the same old grind as before—they want to try something new
• All the pressure they had when they were young

Let’s call this fourth phase of retirement “rehirement.” As Dychtwald puts it: “In the years to come, we will see more older men and women starting their engines and jumping back into the work force, and maybe even having the most productive years of their lives.”

The French Retirement Revolution

French workers have taken to the streets to protest the government's plan to raise the retirement age from 60 to 61 or 62.

Raising the Retirement Age in Spain

The International Monetary Fund (IMF) has recommended that the Spanish government raise the official retirement age in Spain from 65 to 67 and then tie it to increases in longevity rates.

Early Social Security for More Than Half of Americans

More than half of American workers claim reduced Social Security benefits at age 62. As the full retirement age moves farther out, those who claim benefits at age 62 may end up with increasingly inadequate income in their 70s and 80s.

Tangible Mental Accounts

Researchers have shown that people tend to divide their money into separate mental accounts for various purposes, for example, necessities, travel, or dining out, and that earmarking savings to specific goals such as college savings tends to increase saving rates. George Loewenstein, a professor of economics and psychology at Carnegie Mellon University, has proposed applying these concepts to retirement.

The Loewenstein model would have retirees compartmentalizing accounts for various purposes and deploying different investment strategies with different levels of risk for each purpose. Retirement income strategy would focus on "multiple accounts to facilitate different goals, such as paying the rent or spending money on vacations."

No Need to Raise the Retirement Age

A recent study by Buck Consultants has concluded that longer life-spans add only about 0.2 percent to 0.3 percent to the cost of a typical pension plan each year. The implication is that higher retirement age is not an economic necessity because they contribute little to the health or solvency of retirement systems.

That Was Then, This Is Now

Retirement’s Favorite Pastime? Watching Television

In 2009, the average retiree watched 48 hours of television a week.

Preparing for Retirement: 15 Tasks

MetLife has created a to-do list for the trip into and through retirement. Pre-retirees need only complete 15 tasks before taking off. The tasks have to do with five big categories:

1. work
2. leisure time and activities
3. relationships with family and co-workers
4. obtaining employer and federal benefits
5. planning for the future

Here are some of the specific tasks MetLife has identified.

Work: 

Deciding on whether to and how long to continue working is a primary decision about retirement. The big tasks regarding work include:

Decide whether to retire fully, or to work part-time in retirement.

Formulate ideas about how much you'd like to work in retirement.

Explore what employment possibilities are available to you if you want to keep working full- or part-time in retirement.

Leisure and activity:

Determine the proper balance between work and leisure time and identifying your personal retirement goals

Relationships:

Consider the importance of your relationships with co-workers when making a decision to retire.

Consider how the various aspects of your retirement might positively or negatively affect the relationships you have with your family and friends.

Assess whether full-time retirement would be financially feasible for you at this point in your life

Evaluate how changes in the economy will affect your pension, investments, and retirement benefits

Determine the steps that are necessary to receive company, government, or other benefits you're entitled to in retirement

Planning:

The hard part about planning for retirement is uncertainty over the span of the plan. It could cover one year or 40 years or even more.  But plan, nonetheless. Tasks include:

Determine the factors that are critical to maintaining a personally satisfying retirement.

Develop an alternative plan that could get you through a considerable and unexpected setback in your retirement.

Evaluate whether your retirement plans meet the demands of personal, social, and financial changes.

Avoid worry if you haven't completed all these tasks yet. As you move closer to retirement, you will finish more and more of the tasks

Retirement’s New Vocabulary

In his new book, Retirementology: Rethinking the American Dream in a New Economy, Gregory Salsbury merges investor psychology with retirement planning in the midst of a once-in-a-generation financial crisis.

Retirementology introduces a new vocabulary that includes terms for key issues influencing investor behavior, such as:

• Equimortis [ekwimawrtis]: The dangerous condition of relying on home equity to fund retirement
• Bingefy [binjihfy]: Justifying a bigticket purchase because you were previously frugal
• Kinphobia [kinfohbeeuh]: Fear of having to tap into retirement savings to support extended family
• Ohnosis [ohnohsis]: Realizing you really should have started planning for retirement years ago
• Finertia [finurshuh]: Paralysis brought on by trying to comprehend contradictory, overwhelming and confusing financial information