How to Plan A Happy Retirement

16 minutes to read

Baby Boomers should start planning now for a healthy and fulfilling life after retirement.


“Cheshire Puss”. . . Alice went on, “Would you tell me, please, which way I ought to walk from here?”

“That depends a great deal on where you want to get to,” said the Cat.

“I don’t much care where” said Alice.

“Then it doesn’t matter which way you walk,” said the Cat.

—Lewis Carroll, Alice’s Adventures in Wonderland


When it comes to planning for old age, the majority of Americans are as directionless as Alice in Wonderland. Few have even a vague notion of how they want to live out their later years. In the United States, a typical worker logs a lifetime average of 90,000 hours on the job but devotes only about 10 hours to planning what he or she will do after retirement.

Why do so few Americans give thought to the future? After all, as the Cheshire Cat implies, it’s hard to know what steps to take if you don’t know what goal you’re working toward.

But for young adults, the need to build a personal life and career leaves little time and energy to consider the challenges of old age. Many middle-aged people fail to plan for retirement because they mistakenly believe that the federal government, their employer, or family members will adequately care for their needs. Women who devote themselves to homemaking and raising children may consider retirement planning essential only for people with salaried jobs. Finally, every American lives in a culture that considers growing old and retiring to be negative life events. Planning for the future thus requires facing the prospect of losing status in our work-oriented society.

Taking the fear out of aging

The act of envisioning oneself as a happy and fulfilled retired person may take much of the fear out of aging, however. People who expect to find pleasure and meaning out of life in their 60’s, 70’s, and 80’s may find it easier to set aside money for those years, to develop the skills they will need as an older person, and to keep their body in shape for the long haul.

Studies of people who report being happy and fulfilled into their 80’s indicate that most of them traveled, took college courses, read books, or in some other way actively participated in stimulating activities. Research also shows that older people who have fulfilling relationships with family and friends feel better about themselves than those who lack significant social and emotional contacts. The people with strong relationships are more likely to be self-confident, to enjoy sexual activity, and to have lower levels of certain stress-induced hormones associated with disease.

The American way of retiring

Retirement is a fairly new phenomenon. Only in the last 40 years or so have education, employment, and retirement become the standard stages of life for Americans. In 1900, the average life expectancy was 46.3 years, and the relatively few people who made it to age 65 could expect to live only another year or so. But life expectancy has risen dramatically over the course of the century, as has the number of years spent in retirement.

The average lifespan of the first wave of Americans born during the baby boom between 1946 and 1964 is projected to be about 77 years for men and 82 years for women. This means that men who choose to retire at age 62 are likely to live at least 15 years after retirement. Women are likely to have 20 years. On average, as much as one-quarter of an American worker’s life will be spent in retirement. Because women in the United States live an average of five years longer than men, the ratio of men to women decreases significantly in later life. American women are quite likely to outlive their husbands, especially if the husband is older than the wife. Although there’s no easy way to prepare for widowhood or divorce, it’s important for women to develop their own interests and pay attention to their personal needs and wishes during their adult life.

For this and a number of other reasons, the years after 65 do not always bring a cessation of work. For example, many people who earn low wages and have inadequate savings, pensions, and health insurance cannot afford to quit working. In contrast, some highly paid workers find great satisfaction in their careers and are reluctant to leave them, despite financial security. Others continue to work because they enjoy the social interaction and mental stimulation of a job as well as the income.

The coming senior boom

As a result of the baby boom, a large number of Americans will be reaching their 60’s, 70’s, and 80’s in the first several decades after the year 2000. The demographic bulge may force society to make accommodations for older people that other generations never enjoyed. People who want to use their later years in nontraditional ways-by starting a new business, going to law school, or joining the Peace Corps, for example-may find few social barriers and plenty of company.

A 1996 survey of the first group of baby boomers to turn 50 found that most plan to quit their present job by age 58 but to keep working, full-time or part-time, until age 70 or beyond. Baby boomers also appear less likely to stay put than their parents. About 40 percent said they planned to relocate after retirement.

Baby boomers will find their retirement shaped by the corporate restructuring of the 1980’s and 1990’s. Budget cuts, downsizing, the closing of facilities, and mergers mean that members of this generation of workers are likely to change careers at least once and to adjust to several different employer-employee relationships. They may need to think in terms of multiple retirements, rather than a one-time exit from the workforce.

A 1996 New York Times poll indicated just how widespread job insecurity has become. The poll showed that three-fourths of all U.S. households have had a close call with a layoff. A family member had lost a job in one-third of all households. And 1 in 10 adults reported that losing a job had precipitated a major life crisis.

Thus, when thinking about retirement, it’s good to bear in mind that it may include an early and unscheduled departure from a job. Although an insecure present makes planning for a secure future all the more difficult, the absence of job security has served to drive home an important message: There is life beyond work. Other areas in life can also bring satisfaction and fulfillment.

Starting the planning process

For many people, retirement planning means financial planning. But experts agree that when preparing for retirement, it is important to consider more than just finances. Plans should include thinking about where one will live, what one will do for fun and fulfillment, how one will maintain meaningful relationships and social contacts, and what one will do to take care of physical and mental health.

It’s a good idea to start setting aside money for retirement early in life-in one’s 20’s if possible. Planning one’s retirement activities, on the other hand, can begin at any age, though some experts suggest that people should start by their early 40’s. Others say that 10 years before one hopes to retire is early enough to begin making preparations. Because situations and goals change, retirement goals should be reassessed at regular intervals, perhaps on the same date each year.

Planning as a team

At that time, people can review key spheres in life-physical health, emotional well-being, financial health, and intellectual, spiritual, and personal fulfillment. Thinking about the areas that need attention can help in setting tangible goals for retirement and also for the year ahead. Writing down the past year’s achievements in each sphere often brings a pleasant surprise at how much has been accomplished.

The planning process is affected not only by one’s own attitudes and expectations but also by those of the rest of the family. Couples should make plans together in order to work out differing expectations ahead of time. It is not necessary, however, that both partners quit work at the same time, though it can ease the transition if they go through it together.

Retirement planning courses are offered at many locations-one’s place of employment, community centers, local colleges, churches, and other organizations. A more informal option is to create a retirement planning group consisting of four to six people. Members of the group need not be of the same age or occupation. Planning together creates a good environment for brainstorming and learning from each other. The team also provides a mechanism for members to challenge each other to clarify their ideas.

The most important step in retirement planning is deciding how to spend the hours previously devoted to work. A 1995 Canadian study of retired people indicated that those who planned post-retirement activities were more likely to be happy in old age than those who focused only on financial planning. One shouldn’t simply make vague plans to “keep busy,” however. It’s better to come up with specific activities to pursue.

Fulfilling activities to fill the time

The easiest way to begin the planning process is by making a list of interesting activities-college courses; artistic, musical, or literary pursuits; sports and hobbies; travel destinations; government and community service activities; and part-time work and consulting opportunities. As retirement approaches, people are likely to become more focused about what they want to do, and they can begin to prepare for those activities by reading books, making contacts in a specific field, or taking appropriate lessons or courses. Doing these things before leaving the job can also help ease the transition to retirement.

While planning this area of life, one should consider the need for scheduled or structured activities. People who find themselves idling away their weekends and weeknights by watching TV may need the discipline of regular classes, meetings, golf dates, or a part-time job to stay involved in life after retirement. On the other hand, “self-starters” who jump out of bed on Saturday morning to write a To Do list may not need such a structured life to keep active.

Working after retirement

In any case, most retirees may want to give some thought to the possibility of continuing to work after retirement. Part-time employment after one’s official retirement can provide needed income, structure to the days, and a chance to interact with people.

Some people find it extremely difficult to imagine life after retirement, and they may need exercises to “loosen up” their thinking. One way is simply to meet with people who are retired and talk with them about their lifestyle, goals, ambitions, and activities. Another technique is to try to imagine a typical week after retirement and write out a day-by-day schedule for filling the hours.

A more creative strategy involves imagining one’s own funeral. In this exercise, the person writes down what words of remembrance a close friend, a family member, and a co-worker might speak at his or her funeral service. The objective of this thought exercise is not to focus on death but to think about what kind of person one is, how one has lived life so far, and what aspects of life may have been neglected. Workaholics may find this a particularly useful strategy for discovering what they would like to focus on other than work.

Options for housing

Once a person knows what he or she would like to do after retirement, it becomes easier to plan living arrangements appropriate to that lifestyle. The ideal home can be anyplace that maximizes the retiree’s feelings of comfort, safety, independence, and overall well-being.

People interested in moving to a new city, state, or country after retirement can start by visiting a library or bookstore to find reference works describing the pros and cons of various locations in the United States and abroad. Chambers of commerce and real estate associations also provide information-admittedly somewhat biased-about their own communities. Some of the factors to consider include the area’s climate, cost of living, tax burden, crime rate, medical services, cultural amenities, public transportation, accessibility for visitors, and shopping and restaurants.

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Experts suggest that people considering relocation spend as much time as possible in the new area before retirement and try to develop friends and connections there. Many people sell their home, buy a new one elsewhere, and then discover that the new area does not suit them. People can avoid this expensive mistake by renting a home for a year after relocating rather than buying immediately.

The advantages of retirement communities

Living arrangements often change as the years go by and unforeseen events occur. The birth of a grandchild, the death of a spouse, or the retiree’s own health problems may prompt relocation to a new city or a move to a new dwelling.

Some people choose to move to retirement communities, where they can live independently but have easy access to social support and recreational activities. Age and infirmity may eventually necessitate moving to a facility for assisted living. These facilities enable residents to maintain their own apartment while receiving certain services, such as meals, transportation, and in-home care. It’s difficult to predict when such services might become necessary, but it is important to explore options before the need for them arises. Some of the most desirable facilities have waiting lists three to four years long.

Many retirees would prefer to remain in their own home after developing a significant health problem. If that is the case, they should look into the availability and cost of in-home assistance before there is an emergency.

Good health in old age

In many people’s minds, growing older is primarily associated with health problems and physical decline. However, advancing years do not automatically mean debilitating losses in physical and mental functioning. In fact, only about 5 percent of Americans over 65 live in nursing homes or other institutions. Of those over 85, about 22 percent live in nursing homes.

Although some health problems cannot be prevented, taking care of one’s body is an important part of planning for old age. People with chronic conditions such as diabetes or high blood pressure should make sure those conditions are under control to help avoid complications in the future.

It is advisable for people to find out all they can about the diseases that run in their family. This information is particularly helpful if the family has a history of cardiovascular disease, diabetes, or cancers of the prostate, breast, or other organs. Many of these diseases can be prevented or treated in early stages by taking appropriate action in middle age.

Retirement planning is also a natural time to give up poor health habits such as smoking and to begin good ones. People of any age will benefit from starting a program of regular aerobic exercise, eating a low-fat diet with plenty of fruits and vegetables, and learning how to reduce stress.

For those whose health insurance plan allows them to choose their physicians, another good way of preparing for the needs of retirement is by assembling a trusted health-care team. Such a team should include a primary-care physician, dentist, and appropriate specialists.

Common health problems of the elderly

The most common health problems of older Americans fall into three categories. First, mobility problems affect many older people who can’t get around easily because of arthritis, cardiovascular disease, osteoporosis, or other conditions. A second common problem of aging is the loss of function. That refers to diminishing senses such as vision and hearing as well as the loss of bladder or bowel control. The third category consists of mental or emotional problems. Depression is the most common such problem for seniors. Less common is dementia related to Alzheimer’s disease, stroke, or other illnesses that affect the brain.

Many of these conditions can be prevented or treated. Physical exercise, for example, combats cardiovascular disease, improves memory and thinking, and increases flexibility and strength. Regular medical checkups can detect glaucoma, cataracts, hearing problems, and other conditions that may lead to a loss of function. Depression can be treated with drugs or psychotherapy at any age. Urinary incontinence is now treatable with medication and surgery.

Another fact of life is that at least 40 percent of middle-aged Americans are now responsible for the care of aging parents and other relatives. The average 50-year-old couple in the United States already spends more time caring for their aging parents than rearing their children. The financial, health, and personal needs of aging parents thus place a big demand on many people nearing retirement. Women in particular tend to shoulder this burden. A middle-aged woman is more likely than her brother to shorten her work hours or quit work entirely to care for their aging parents or other relatives. Her own retirement plans may have to be put on hold because of her early exit from the work force.

People approaching retirement should also stay apprised of legal changes affecting health insurance for older Americans. Changes in the availability of Medicare, for example, may cause retirees to pay more for health care than they had originally budgeted. As of 1996, Medicare covered less than 40 percent of health-care costs for eligible participants.

Preparing for the emotional challenges of old age

Mental health is an important component of overall well-being at any age, and even more so at retirement. People who are prone to depression, for example, may be at risk for a worsening of the condition in retirement, particularly when they experience health problems or the death of close friends or a spouse. Giving up work can also cut people off from daily social contact with peers and leave them feeling alone and adrift. It is wise for any older person to be alert for the symptoms of depression, which include changes in sleeping and eating habits, loss of energy, feelings of hopelessness, and thoughts of suicide.

Just as it is possible to improve one’s memory by learning certain skills, it is possible to learn skills that will improve psychological health in old age. Research indicates that older people with good mental health are likely to be adept at three psychological skills. The first is sometimes called “reframing”-the ability to see apparently negative events and circumstances in a positive way. A common example of reframing is to think of a glass of water as being half full rather than half empty. People of any age can develop the habit of reframing by actively searching for a more positive perspective when faced with an unpleasant turn of events. For example, someone who is fired from a job might recognize that the setback is also an opportunity to move in a new direction.

The importance of adaptability and self-esteem

The second skill that is helpful to develop is adaptability, the ability to easily accommodate new situations or “go with the flow.” For example, during the ups and downs of a working life, employees are often faced with changing circumstances: a new boss, a relocation, a shift in responsibilities. Some employees will be distressed by these changes, while others will not be terribly bothered. People who can learn to adapt to new situations tend to be less distressed by some of the events that accompany old age-physiological changes, for example, or a decline in status after retirement.

The third psychological skill is developing a sense of self that can evolve and grow over the years. A woman who has long taken pride in being a mother, grandmother, and homemaker, may have difficulty adapting to a move to a small retirement condominium in a state far away from her children. However, if the same woman thinks of herself in broader terms-for example, as a creative and nurturing person-then moving to a new location may not be so difficult. After all, she could continue to express herself and use her talents by taking art courses, organizing a community garden, or starting a day-care center.

Financial preparations

Once details of a person’s desired retirement lifestyle have been fleshed out, he or she is in a much better position to make financial plans for supporting that lifestyle. Among the things that should be considered are future expenses-including housing, food, clothing, gifts, travel, entertainment, insurance, and other items. Many retirement planners use 70 to 75 percent of current income as a general rule of thumb for budgeting. A person should also calculate income anticipated from pensions, personal savings, investments, and social security and survivor’s benefits. Subtracting the projected need from income shows whether there will be sufficient money for the lifestyle envisioned.

This calculation may well yield an unpleasant shock, according to a Merrill Lynch Investment Company survey of preretirees and managers who administer pension funds. This survey found that most Americans think they are better financially prepared for retirement than they actually are. Nearly 40 percent expected that social security would be their most important source of income. In fact, according to a 1993 U.S. Treasury Department report, only 20 percent of income among retirees living on $20,000 or more a year came from social security. An additional 15 percent came from employee pension plans. Personal savings, investments, and other sources of income made up the remaining 65 percent.

Financial planning assistance

Given an income shortfall, some people may decide to delay retirement for a few years or to begin scaling back their living expenses. Most individuals with pensions, on the other hand, may find that they have a financial incentive to retire after they have reached the required age and years of service.

A financial planner can help workers decide on a timing strategy and get the most out of savings and investments. Some financial planners charge an hourly fee to set up a financial program that the client then carries out. Other planners receive a commission on any financial transactions they make on the client’s behalf. In many cases, the former type of professional will be less expensive in the long run than the latter.

Another strategy for handling the financial end of retirement planning is to take a course at a community college or university to learn more about investing. One should exercise caution and common sense before enrolling in expensive seminars in hotels and conference sites, however. Such seminars, particularly those that promise an unusually high yield on investments, may be operated by unscrupulous types rather than legitimate, credentialed financial planners.

In general, the key to success in financial planning is anticipating as many problems as possible. These include one’s own financial needs as well as the those of others. Younger as well as older members of the family may require help at some point. Grandparents sometimes assume significant responsibilities for their grandchildren, typically when their adult children suffer economic hardships, become ill, or die. The health problems of spouses and other family members can significantly affect a retiree’s finances as well.

Legal details

A final task in preparing for retirement is to contact a lawyer to prepare a will, handle the legal issues of estate planning, prepare a power of attorney, and create an advance directive, or “living will,” to spell out one’s wishes regarding medical treatment. Books available in a public library offer tips on legal preparations for retirement. In addition, it may be helpful to seek out a lawyer who specializes in elder-law issues. State bar associations can help residents find a lawyer in their area with this specialty.

Clearly, retirement planning involves much more than setting aside a nest egg and investing in life insurance. To successfully plan for retirement means preparing for secure and comfortable housing, good mental and physical health, and involvement in meaningful relationships and activities. But by establishing goals, gathering needed information, and cultivating new skills, it may indeed be possible to live happily ever after.

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