Thanks to baby boomers, the retirement landscape is rapidly changing. Here’s how to prepare your finances.

When you think of retirement life, what comes to mind? Are you sitting in a rocking chair watching the sunset from your porch? Or are you hang gliding in Aruba, finishing a triathlon, starting a new business, or even volunteering in Africa? There’s no right (or wrong) answer, but yours may very well depend on the generation you belong to.

“The baby boomer generation has benefited from advances in medicine and education, and from being more physically active,” says Alex Gonzalez, Area Wealth Executive for Regions Private Wealth Management in Central Florida. “All of these contribute to a healthier and longer life. Retirees aren’t sitting idly passing the time. They’re controlling their own destiny and enjoying the rewards of a successful career.”

But a longer, more active retirement may require extra savings and careful withdrawal strategies. “All of this makes the planning discussion even more essential,” Gonzalez says.

Does the 80 percent rule fit your needs?

While the traditional idea of aiming to save enough to generate an amount equal to 80 percent of your pre-retirement income is a great starting point, it may not be right for everyone. Some individuals — such as those who want to devote money to travel, purchase a second home, or pursue higher cost recreational activities — will likely need to save more. On the other hand, those who plan on maintaining their current lifestyle or downsizing may find that 80 percent of their pre-retirement income is enough to comfortably sustain them.

When creating your retirement plan, it’s important to remember that your financial needs will likely fluctuate over time, as your spending habits at age 65 will likely be much different than they are at age 85. In early retirement life, your spending might increase as you pursue goals and dreams, before settling into a more regular pattern for a period of time. In late retirement, factors such as increased medical expenses and long-term care costs may cause your spending to rise once again. It’s a good idea to plan in advance for these distinct stages of retirement and organize your savings appropriately.

Working in retirement

Traditionally, most people quit the workforce around age 65 and spent the rest of their days at leisure. That model is changing, however, as many boomers plan to work beyond traditional retirement age. In fact, a 2018 study by Transamerica Center for Retirement Studies found that 56 percent of workers plan to continue working past age 65.¹

While some boomers are being forced to work longer for financial reasons, others are choosing to do so simply because they want to. “They enjoy their work, and they still feel young and healthy enough to keep going,” says Gonzalez.

Roughly half of today’s workers plan on either reducing their work hours or moving to a less demanding role after they reach retirement age. A gradual or “phased” retirement can be a good solution for career-oriented individuals who find themselves struggling with a lost sense of purpose. For example, some retirees may choose to offer consulting services on an ad hoc basis, allowing them to remain involved in their former industry without being tied to a 9-to-5 schedule. Others may choose to leverage their professional expertise in volunteer work, to go back to school, or even to take on a part-time job.

Whether it’s fulfilling long-held goals or continuing to work during retirement, these planning considerations are different than they were for the previous generation of retirees. No matter what your post-retirement goals are, working with a financial professional can help you plan ahead for a longer, more active retirement.

“It’s never too early to start thinking about retirement,” Gonzalez says. A key part of financial planning at any stage is ensuring that your assets are diversified so your retirement security doesn’t hinge on the fate of any single venture.

Wondering if you’re on the right track? Use our retirement calculator to estimate how much you should save for your retirement.

¹ Center for Retirement Studies, “18th Annual Transamerica Retirement Survey,” June 2018