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Ken Dychtwald Ph.D.

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Is Retirement Getting Better Or Worse?

Posted: 07/13/11 02:00 PM ET

Exactly 10 years ago in 2001, Age Wave, in partnership with SunAmerica Financial Group and Harris Interactive, conducted the landmark "Re-Visioning Retirement" study, for which we interviewed 1,000 men and women age 55 and older to learn how they felt about retirement. This groundbreaking investigation was the first to look beyond basic financial and demographic issues to reveal the emotions, attitudes, expectations and behaviors of pre-retirees and retirees nationwide. The study revealed that the majority of Americans thought they'd be able to comfortably retire in their early- to mid-60s. And, thanks to a lifetime of savings, guaranteed company pensions and rock solid government entitlements, most thought they'd be able to afford decades of non-working leisure.

That was just 10 years ago! Back then, the Cold War had ended and the "War on Terror" had not yet begun. The government was running a $230 billion surplus. The Internet was an exciting novelty. And while a quadrupling in stock-market values in the 1990s bolstered retirement savings, unemployment levels were under 5 percent.

Then, things changed ... dramatically. Rocked by events and reactions associated with 9/11 and then the recession, the stock market showed virtually no net gain during the last 10 years and many people saving for retirement have suffered losses in both investments and home values. Unemployment rates are now hovering near 10 percent, making it difficult for many to get by, let alone save for retirement. And the government is now running a $1.3 trillion deficit, putting into question the sustainability of retirement entitlements such as Social Security and Medicare. At the same time, the massive Baby Boomer generation has begun moving into their retirement years. This vast generation brings both new expectations and hopes for retirement, as well as lower savings rates and greater uncertainty for how they will fund their increasingly long lives.

The Wake-Up Call: What a Difference a Decade Has Made

And so, to find out exactly how the recession and all of the changes of this past decade have impacted the public's mindset, family dynamics, lifestyle expectations and attitudes toward retirement, Age Wave, SunAmerica and Harris Interactive again joined forces to conduct The SunAmerica Retirement Re-Set Study (for a complete study report, visit retirementreset.com).

Our comprehensive 2011 survey of 1,000 men and women ages 55 and older revealed that while many Americans got pretty shaken up over this past decade, they are emerging wiser, more disciplined and with a new more pragmatic approach to an entirely new kind of retirement. Just as a personal health crisis can sometimes jolt an individual into making smart -- and even long-needed -- lifestyle changes, many people have been permanently jolted by this financial wake-up call.

Retirement Mindset Re-Set

While financial losses are easily measured in stock charts and home prices, the psychological damage and costs of a recession are just as real. In fact, anger, worry and financial insecurity remain pervasive. However, our study revealed that a more pragmatic vision of retirement is emerging.

Seventy-eight percent of the respondents said that they can still have a fulfilling retirement by being more financially disciplined. In fact, most believe they can still "get there from here" -- although, for many, "there" is now envisioned more realistically. For example, in one of our focus groups, a pre-retiree said that before the recession he was hoping that in his retirement, he'd get to play all of the great golf courses in Europe. Now, he said, he'd be quite satisfied to play all of the great public courses in New Jersey!

SunAmerica Financial Group's President and CEO Jay Wintrob reflects, "Americans have re-set their vision of an ideal retirement. They are course-correcting: intending to save more, spend less, be more disciplined and adjust their lifestyle expectations."

Living to 100

When we asked the survey participants if they'd like to live to 100, a whopping 67 percent said yes! But longevity has its potential problems. Their biggest worries about living a very long life were: 1) losing their health, 2) being a burden on their family and 3) running out of money. On the other hand, they viewed the key benefits of extended longevity as: 1) continuing to remain productive, 2) developing deeper relationships with their family and 3) the chance to be around to witness new discoveries and watch the world evolve.

What the pre-retirees in the study told us is that if you're going to wind up living to age 80, 90 or even 100, it would probably be wise to work longer. Whether driven by financial practicality or a desire to live a more engaged and productive life, 77 percent of pre-retirees say they would ideally like to include some work in their retirement. And when we point-blank asked what the primary reason would be, the No. 1 response was the stimulation and satisfaction that continued work offers. Money was also important, but it ranked second.

The Retirement Wildcard: The Bank of Mom and Dad

Family and relationships are at the heart of what Americans most value, and these difficult times have brought families closer together. Eighty-five percent said they now appreciate the importance of quality relationships with their friends and family even more. And, an incredibly high 96 percent said that "it's important to protect myself and my family against financial uncertainties."

Not only have family "ties" been re-prioritized, but some potential family "tensions" surfaced as well. In an era when so many working-age people have become financially strapped, family assistance has become the new retirement "wild card," as maturing men and women must balance their retirement plans with the possibility of having to financially and emotionally support aging relatives, adult children, grandchildren and siblings. Half expect they will need to provide some financial assistance to family members. And, in a new twist on "child-care" that may extend many more decades than originally anticipated, 70 percent of these say they expect that they will need to provide financial assistance to their adult children.

Retirement Planning: Not a Do-It-Yourself Project

People increasingly recognize that new economic realities and new retirement dreams mean new financial solutions are needed. People have become far more cautious and now say that protection from losses is the top priority for retirement investments. And what did these age 55-and-older men and women say was their biggest financial worry at this stage in their lives? The unpredictability of tax increases downstream.

One of the interesting insights that emerged from the study had to do with asking retirees from all walks of life if they had retired earlier or later than they had planned. While 9 percent reported that they had retired later, more than five times as many (49 percent) said that they had retired earlier than they had planned. While it's natural to think that early retirement is most likely a sign of financial success, it's not anymore. The top reason people give for early retirement is unexpected health problems.

Many people now recognize that retirement preparation is not a do-it-yourself project, and that they need guidance to set a new, more predictable path toward successful retirement. Many now strongly feel that financial education should be a lifelong process, with 92 percent saying that financial management should even be a standard part of high school education.

And yesterday's version of the fast-talking stock broker is passé. Today, people want a financial advisor who listens and understands what is important to them. They're seeking a trustworthy advisor who speaks their language and can help them identify solutions that are specific to their needs and priorities.

So - is Retirement Getting Better or Worse?
We asked all 1,000 or our pre-retirees and retirees whether they thought that retirement would be better or worse for the boomers. And the answer we heard was "it will be both." People said that boomers will have less government entitlements, less money and less respect from younger generations (which probably won't bode well for their receipt of intergenerational entitlements). On the other hand, they believed that in this new era of retirement, compared to previous generations, boomers will be more active and youthful, more likely to continue to learn and grow in maturity and that they'd ultimately be living more interesting lives.