Shouldn’t your Retirement be your “Encore” Life? Part 1

Part One of Weekly Three Part Series starting 6/14/19.

Part 1 – Don’t Plan for Retirement

The retirement you saw your grandparents or even your parents live through will likely not be the retirement you choose for yourself. Consider the following:

In 1900, the average life expectancy was 47 years. Only 100,000 Americans lived to age 85.

By 2010, the number of people over 85 years old had grown to 5.5 million and was one of the fastest growing segments of our population.By 2030, as the last Baby Boomers turn 65, older adults are expected to reach 20 percent of the population, and by 2050, 19 million people will be in the 85+ age group.

The point is clear; people are generally healthier and living longer than ever before. Those with better than average education and access to health care will likely beat the longevity averages and many will live well into their 90’s.

When Social Security was created back in 1935 (with benefits starting at age 65), the average life expectancy was 61 years old. Planning for a lengthy retirement simply wasn’t a concern. Today, however, medical advances are increasing both health span (how long you are free from disease and disability) and life span (how long you live). Roughly 10,000 people turn 65 every day, and they are increasingly likely to live 25-30 years beyond that traditional retirement age.

Most traditional financial planning tends to focus on achieving goals throughout life, culminating in something called retirement. But planning for what happens and what you want to do during retirement is often lacking. The word “retire” actually means to withdraw or retreat, which may have been the case after age 65 many decades ago, but that is the opposite of what most people reaching 65 today want to do.

Picture your life in overlapping 25-year time spans:

  • Birth to 25;
  • Age 10 to 35;
  • Age 20 to 45; and
  • Age 30 to 55. 

Consider how much you grew and changed during each of those periods. Now imagine the life you will live between 65 and 90, assuming that much of that time you will be relatively healthy and productive. This period is increasingly becoming known as the longevity dividend or longevity bonus, an exciting time that past generations have not had. This extra longevity changes the way we must view retirement and how we will live.

Now let’s divide your life into 4 “quarters” of about 25 years each.

First Quarter

The first quarter’s milestones tend to be triggered by specific ages: your first birthday, starting school, getting a driver’s license, being allowed to vote, and as you become established in your 20’s, beginning to figure out who you are and what you want to do as a career.

Second Quarter

The second quarter’s milestones tend to be more event and growth oriented, not age-based: marriage; your first house; your first child and then growing in your career as you raise your family. Your income rises, but so do expenses, and you ideally begin setting aside significant amounts for college, as well as in a 401(k) plan or IRA for your own retirement. This is a period when you may often be defined by what you do for a living rather than who you are as a person.

Third Quarter

During the third quarter, you become eligible, based on your age, for certain government (and possibly company) benefits.  At age 50, you’re allowed to make extra “catch-up” contributions to your IRA and 401k plans. At 59½, you can begin withdrawing money from such plans without penalty. At 65, you become eligible for Medicare benefits.  You can begin receiving Social Security benefits at different times: age 62 (at a discounted rate); between 65 and 67 (your “Full Retirement Age” rate); or at 70 (at a higher rate). At age 70½, you must begin taking Required Minimum Distributions (RMDs) each year from your IRAs and other tax-deferred retirement accounts.

The third quarter is also about transition, when the idea of retirement morphs from a rather vague concept to a much more concrete awareness, with future plans solidifying as life’s traditional goals are reached.  Children are grown, tuition payments have ended, mortgages are nearly paid off, and career duties may have become less rewarding or stale. You begin to think about what’s next; you are ready for more flexibility, and the chance to explore what else life has to offer. You also have a greater perspective of what is important in your life, and you desire to be that person, and live that life. This is a period where you are defined far more by who you are than by your job.

Fourth Quarter

The fourth quarter is about slowing down, downsizing and leaving a legacy for your family, friends and community. This is a period of defining how you want to be remembered.

Don’t plan for retirement…

                                Plan for an “Encore Life.”

An Encore Life is something that begins during, and is an extension of, the 3rd quarter of life, thanks in large part to the longevity bonus.  It should be a time of newfound freedom and flexibility.

The concert has not ended; the audience is so happy with the performance that they cheer for an encore – expecting to hear the best, most famous songs.

If you love your life and are totally satisfied with it “as is,” congratulations! Don’t change a thing.  But many people are ready to rediscover who they are, and what they want to do next with the considerable time they have left.

Here is a framework that can help you focus on making the most of your third quarter and creating your Encore Life:

  • Self-Discovery/Awareness
  • Health & Wellness
  • Money & Finance
  • Relationship with Partner
  • Relationships with Family & Friends
  • Personal Growth & Lifelong Learning
  • Career & Work
  • Community & Civic Engagement
  • Leisure & Recreation
  • Lifestyle & Housing/Environment

Retirement planning, as we have traditionally considered it, will prove insufficient for the years most people will actually spend after their careers are over and their children are on their own. Instead, planning for retirement should be expanded to include longevity planning, and should contemplate the lives people want to live during those extra years.  Make the most of your 3rd quarter; plan for an Encore Life!

In upcoming Parts 2 and 3, we will use some tools to help you evaluate and quantify these ten areas in terms of:

  • How satisfied you are with each one as it pertains to your life now;
  • How important each one is to you—how highly you value them;
  • Your current actions/behaviors in each area, and whether they are consistent with the importance you assigned each one.

We will then look at how to establish goals that will help move your levels of satisfaction higher in the areas where you want to improve.  This will help you make the most of your future, and make your Encore Life the best it can be. 

To learn more about the Encore Wheel of Life tool and the framework mentioned above, click here.

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