Five Forces Shaping the New Retirement Journey

We speak with Ken Cella, principal of branch development at Edward Jones, about the major trends shaping retirement planning today, including how the pandemic changed the way people view and plan their retirement. Cella also discusses how consumers can better prepare for retirement during a high inflation and rate-rising environment.

What are some of the ways retirement plans have changed over the past couple of years? And do you see retirement changing again in the coming years? If so, how?

According to our recent study with Age Wave, Longevity and the New Journey of Retirement, retirement today is no longer a destination; it’s a journey, a whole new chapter of life. With the gift of greater longevity, today’s retirees have more opportunities than ever to make the most of their years, activities, contributions and relationships.

Nearly seven in 10 Americans say they want to live to 100, and retirees say the ideal length of retirement is nearly three decades. But this isn’t their parents’ vision of retirement, they expect retirement to be a whole new chapter in life—filled with fun, enjoyment and new possibilities for reinvention. They see celebrities and business leaders who continue to share their talents with the world into their 70s and beyond, and it’s inspirational to them.

Longevity is actually one of five trends we identify as the five major forces currently converging to shape the new journey of retirement. Other trends include the outsized Baby Boomer generation, which coupled with aging Gen Xers, has tripled the number of Americans age 65+ in the last 50 years; the closing lifespan-healthspan gap or the amount of time Americans live in retirement without being curtailed by illness, injury or cognitive decline; the demise of the three-legged stool for funding retirement; and of course, the COVID-19 pandemic.

How are different generations redefining their retirement plans?

Different generations view retirement plans differently, but across the board, the lines between work and retirement are becoming even blurrier. As of today, there’s no clear definition of what marks the start of retirement. For half, it’s related to stopping work, but 17% say it’s about achieving financial independence.

Among today’s retirees and pre-retirees, 59% would like to work in some fashion during their retirement. We suspect that this trend will grow even stronger with younger generations. Also, the movement toward remote work will hopefully open more opportunities for retirees to work during retirement.

Markets are down and we are currently in a high inflation and rate-rising environment, how can consumers better prepare for retirement during this time? What should they keep in mind?

We don't think that a recession is inevitable, but volatility is unlikely to end soon. For those still with time until they hit retirement age, staying invested and focusing on the long term is the best way for them to prepare amid the disruption. For those closer to retirement age, a focus on balance and diversification can potentially better help weather short-term dips, which over the long term are nearly impossible to avoid.

What are some key financial lessons for consumers who want to prioritize their retirement plans?

Pre-retirees must start preparing now in order to set themselves up for success when they hit retirement. According to our study, retirees say they started saving for retirement at age 38 on average, but in retrospect, they should have started saving nearly a decade earlier, at age 29. We also found that over half of retirees wish they had budgeted more for unexpected expenses. The value of financial foresight cannot be underestimated.

The key financial preparation actions we recommend are contributing to a retirement account such as a 401(k), paying off a mortgage or other debts or loans, investing in stocks, bonds or securities, developing a thorough financial strategy for retirement and working with a financial advisor.

Retiring early seems to be growing trend – what are your thoughts on it?

People enter retirement at different ages and under different circumstances with countless possible paths and paces. The reality of retiring early is it takes commitment and maybe a bit of sacrifice to pull it off. Those who wish to retire early need to grow retirement funds within a shorter time frame and possibly commit to a more modest lifestyle to help maximize savings.

How has the pandemic changed the way people view retirement?

COVID-19 has disrupted the lives of all Americans across the four pillars of health, family, purpose and finances. One silver lining of the pandemic is that many are re-thinking what really matters and how they want to spend their time in retirement.

The biggest change we’ve seen is how the pandemic both delayed and accelerated retirement timelines. The pandemic has led nearly 70 million Americans to rethink the timing of their retirement, either postponing it for financial reasons or accelerating it because they have rethought their priorities and working has become less attractive.

For those who transitioned into retirement during the pandemic, they did not experience the same heightened feeling of liberation that retirees typically feel in their first two years. Many of these retirees are just now starting to enjoy retirement.

This interview originally appeared in our TradeTalks newsletter. Sign up here to access exclusive market analysis by a new industry expert each week. We also spotlight must-see TradeTalks videos from the past week.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.