If you look in the dictionary, the definition of “retire” is to “withdraw from one’s position or occupation or from active working life.” As society continues to change, however, so does its definition of retirement. Arianna Huffington, founder of The Huffington Post, said that in the same way a productive workday depends on one’s preparation for it, a productive retirement depends on what is put into it.
“For many 70 really is the new 50. Increasingly, people are rejecting the idea of retirement as a withdrawal,” Huffington said. “They want their later years to have as much meaning and purpose as their primary working years — or, in the case of many, more purpose and more meaning.”
The word “retirement” is usually associated with financial aspects, like the idea that one needs to save up a huge amount of money to slowly live off of once they retire. Though accurate, Huffington said this view can make retirement seem like a time of limited possibilities and outlooks, when in actuality it is an opportunity for widened possibilities. The same things that are redefining success in the workplace are also redefining retirement, she said.
“The way we think and talk about retirement needs to catch up to what is already happening. The time has come to retire the old definition of retirement,” Huffington said. “A thriving retirement is, of course, greatly aided by financial security, but to truly thrive means much more than just having met your “number” on a 401(k) statement. It means realizing that retirement can be a time of expansion, engagement and adventure.”
Generally, a person can be considered retired when they have sources of income that do not need to be earned by working. Many use the term “retirement” interchangeably with “financial independence.” It can also mean leaving a current job to work in a different field, or simply never working again.
While the standard retirement age is 65, there is no mandatory age to retire; every situation is different. Social Security created a Full Retirement Age (FRA), which is determined by a person’s day and year of birth. This is the age at which they receive the full amount of Social Security benefits. Anything before 60 is usually considered an early retirement. Many retirees choose to continue working in a different job, usually for lower wages. This can help offset living expenses while a person continues to save for a full retirement.
It is best to start saving for retirement early, while in one’s 20s and 30s. The recommended amount to save at this age is 10 percent of one’s total income per year. If one waits to start saving later, say in the 40s, it is recommended to save 50 percent per year. If one wants to invest money, there will be decisions about how much to invest and where to invest it. Future retirees must also decide when is the best time to start taking Social Security benefits and other pensions.
Experts at the Employee Benefit Research Institute say that in order for workers to maintain their current standard of living, they need to have around 10 to 20 times what they earn each year in retirement savings. However, around 36 percent of American workers have less than $1,000 in retirement savings (outside their homes and pension plans), and 60 percent have under $25,000. This lack of preparation can lead to poverty–among middle-class working Americans, nearly half of middle-class working Americans will be poor or almost poor in their retirement years, another study found.
According to Boston College’s Center for Retirement Research, the current national retirement-income deficit, or the difference between what current workers will need to live off of when they retire and what they currently have saved, is $6.6 trillion. This could be due to the fact that many Americans have never thought about their future retirement needs. Only 44 percent have calculated how much they will need to save by the time they retire to live comfortably in retirement.
However, even if they have thought about it and started saving for retirement, other financial issues like debt can be stumbling blocks for reaching goals. Fifty-eight percent of workers and 44 percent of retirees say their level of debt is a problem.
Another issue to consider is the idea of the “sandwich generation.” This describes the population of middle-age adults who are still supporting a child (18 or older) while also supporting a senior. According to the Pew Research Center, 47 percent of adults in their 40s and 50s are a part of this sandwich generation.
Even though these middle-age adults are devoting more resources to their grown children, a greater value is placed on caring for senior parents than for grown children. The research shows that 75 percent of the general public says adults have a responsibility to provide financial assistance to an elderly parent who is in need, while only 52 percent say parents have a similar responsibility to support a grown child.
This issue is important because these middle-age adults need to consider the possibility that they might not only be supporting themselves, but also a senior parent in their future retirement. Those seniors about to retire or are recently retired need to consider if they are financially stable enough to handle possible long-term healthcare needs without the help of a child. Long-term care insurance can be an extremely helpful planning strategy for retirement, especially for the sandwich generation.
Maintaining independence, physically and financially, may be an important goal to a retired senior. In many situations, an in-home caregiver can provide the help a person needs with activities of daily living, while still allowing them to maintain the independence in their own home. Qualified professionals can also help seniors navigate through the financial planning that may be required for health care needs in retirement, which can allow one to remain financially independent from family members.
Written by Taylor French, Amada contributor.