“We have a longevity paradox. Now that we have achieved what humankind has tried to achieve since it has walked – living longer – we really don’t have a good idea of what to do with all that additional time.”
– Dr. Joe Coughlin, Director of the MIT AgeLab
The AgeLab was established at MIT in 1999 as a multidisciplinary research program that works with business to improve the quality of life of older people and those who care for them. The AgeLab applies consumer-centered thinking to understand the challenges and opportunities of longevity and emerging generational lifestyles to encourage innovation across business markets. Their insights are critical for anyone who is nearing retirement, or who has loved ones such as parents, aunts, or uncles who are entering this stage of life. This article in our series discusses the “Honeymoon” phase and how we adjust to life without a paycheck.
The Honeymoon Phase of Retirement
As we discussed in our last article, the folks at the MIT AgeLab have proposed a new name for the “retirement years,” the stage of life that begins roughly at age 66 and extends for 25 or more years through the end of life. According to the AgeLab, these years should be named the “Exploring” phase of our lives, as opposed to “retirement.”
In their model for aging, the AgeLab also suggests that there are four distinct phases that people experience as they live through their “Exploring” years. The first of these is the “Honeymoon” phase, named because it marks the period of time when this whole idea of exploring our freedom is brand new to us. But, there are also a number of adjustments that must be made as we acclimate to the changes in our lives.
In last week’s article, we discussed a critical and often difficult question that must be answered during this phase, which is “What is the role of work in our lives”? For further reading on this issue, we highly recommend this article from Financial Advisor Magazine, “Personal Continuity Planning for Retiring Business Leaders.”
The second major adjustment that must be made during this transition period is developing an income and cash flow plan.
Where is My Paycheck?
When most of us enter this phase, we have been working and earning a living from our monthly paycheck for 30 or 40 years. Now, we may be shifting to a period where our earned income may be declining or eliminated altogether, and we need to replicate our monthly paycheck through sources such as pensions, social security, and savings.
This adjustment can be complicated and requires planning. Many of us may also need to live within a defined budget for the first time in our lives. We may face some uncertainty that we have calculated that budget wrong, and that our living expenses may actually outstrip our planned budget once we actually stop working. Unexpected healthcare expenses may also be a real concern.
It also may be difficult to develop an effective plan for harvesting income from our savings and investment portfolios: After spending a lifetime saving and investing as an accumulation investor, the strategies involved with creating an effective investment distribution plan can be complicated. Finally, there may be some concern that the income sources we were counting on may not actually be there for us in our older years. Many of us may already be worried that Social Security benefits may be reduced in the future and that pension plans may not be as reliable as we hoped. According to a study conducted by the Employee Benefit Research Institute in 2017, 54 percent of workers expect to receive pension benefits in retirement, and only 39 percent of workers report that they and/or their spouse currently have such a benefit.
Do the Kids Get to Come on the Honeymoon?
The “Honeymoon” phase is a period of transition, and it requires adjustments for the whole family, impacting family dynamics and our relationships with grown children.
On the one hand, we may hope to have more time and energy to enjoy our children and grandchildren. Because the kids are grown and presumably out of the house, and professional and financial responsibilities are more manageable, we can spend more time with family and less time working. However, because the kids are grown and out of the house, we also have no control over where they will live. One or more of our children may choose to live in a different city or state from us, or worse yet, we may have multiple children in multiple locations. We may have to travel, or possibly even relocate to another state if we wish to be close to family.
On the other hand, although our children may be grown, that does not necessarily mean that they are financially self-sufficient, or even that they have moved out of the house yet. While there is a common perception that adult children may be counted on to provide financial help for their aging parents, the facts are somewhat different. According to a Pew research study, only 28 percent of adult children provide financial help to aging parents, while 61 percent of parents provide financial help to their adult children.
The “Honeymoon,” or transition into the “Exploring” stage of life may not be quite as easy as we had hoped. There are critical questions to answer about the ongoing role of work in our lives, our ability to sustain our income over many years, and the impact of our new stage of life on our family relationships.
Following this phase, we enter the “Big Decision” phase, when we will have to make serious decisions about where we will live, finding our purpose, and maintaining access to the creature comforts of our lives. Our next article will address these questions.