Library Worklife

HR Practice

Planning for Retirement

"The Times They Are A-Changin’"

By Paula Singer, Ph.D., and Linda Goldberg, SPHR, CCP

With a population bulge of baby boomers approaching the prototypical "retirement" years, millions of people are asking themselves how to plan for retirement. A better question to consider: What is retirement?

Defining the Terms

Baby boomers, whose parents were born during the Depression, may have outdated notions of what retirement is. Their parents, born to a turn-of-the-century generation with a life expectancy of about 40 years, saw retirement in much different terms than today. The prior generation of retirees largely saw retirement as a reward for loyalty to an organization, a relatively short period for rocking chairs, fishing holes and grandchildren, leading up to incapacity and infirmity. The 65-year-old, who retired from a life-long career, anticipated relatively fallow, unproductive years supported by a strong nuclear family and paternalistic government programs. Given life expectancy and health status for this generation, expectations for the length and quality of retirement were low.

It would be very difficult to talk about retirement planning without coming to agreement on what retirement is in 2004. The American Heritage Dictionary defines retirement as:

1. The act of retiring [big help!]; 2. The state of retiring [ditto!]; 3. Withdrawal from one’s occupation, business, or office; 4. Withdrawal into privacy or seclusion; 5. A place of privacy or seclusion. The dictionary also defines for us the verb retire as: 1. To withdraw, as for rest or seclusion; 2. To go to bed; 3. To withdraw from one’s occupation, business, or office; stop working; 4. To fall back or retreat, as from battle; 5. To move back or away; recede.

While we may, at times, look forward to rest, seclusion, and a withdrawal from our daily battles to earn a living, few baby boomers would see their prospective retirement in these terms. The demise of life long careers and promises of employer fidelity have compelled many baby boomers to think of this stage as one of " recommitment " (to coin a phrase), and possibly one of several recommitment periods they will face during their extended life time.

Recommitment

So, having abandoned the ambiguous and ill-meaning word "retirement", what does recommitment look like? Recommitment is any period in one’s life where one takes a step back, reassesses personal values, goals and resources, inventories how well these goals and resources are filled, and makes plans to meet next stage objectives. In his article in ALA-APA’s Library Worklife titled "Beat the Work/Life Balance Conundrum with a Quality of Life Context," Burt Woolf provided concise, descriptive language for expressing a universe of personal values and goals which persist through a lifetime. We repeat his excellent list below:

Internal Quality-of-Life Experiences

Sense of self-worth, meaning, purposefulness, and fulfillment
Joy, inspiration, spaciousness, awe and creativity
A motivating passion to serve
Striving for integrity and excellence

External Quality-of-Life Experiences

Sense of community, connection and partnership
Respect and caring about the well-being of others
Stewardship responsibility for sustaining the natural and human resources in our world that contribute to quality of life around us

Let’s take as a given that all of the baby boomers on the recommitment cusp innately share these values. Then, recommitment is just one of a series of opportunities to change, not terminate, where we direct our energies towards cultivating internal and external quality of life experiences. The end of working for one long term (or short term) employer is the beginning of spending energies in another setting, possibly tapping into a different set of talents. Recommitment becomes a new start as we fulfill one commitment and move on to another. We recommit in an era of different expectations based on the change in the employee/employer contract and our change in stage of life: our commitment to an organization will continue as long as the benefits are mutually enjoyed by both parties. The advantage the baby boomers have at this recommitment, coming later in the entire career cycle, is that there may be an easing of financial constraints assuming careful planning and diligent implementation.

Planning for Infinite Possibilities

Planning and diligent action need to take parallel paths all along the life/career continuum. It is fruitless to dream of hiking the Grand Canyon at age 60 without implementing a financial plan to underwrite supplies and a physical plan to develop stamina and strength. Planning is a long-term task, based on faith in the future. The ultimate faith many parents have in the future prompt them to open college savings accounts soon after the baby’s birth. Eventually, they hope, their child will develop the intellectual curiosity, study skills and focus to pursue a college education. Similarly, anyone entering the work force in any capacity should take full advantage of the many ways there are to cultivate resources—financial, intellectual, social, physical—to support a broad range of long term contingencies.

When most people think about retirement, they concentrate on the financial side first, and that’s the area we’ll address first. The secondary question that may be postponed pertains to how to satisfy external and internal quality of life experiences after leaving the current (or subsequent) employer. We’ve taken these issues in order.

Financial Planning

The perennial retirement financial question is, "How much do I need to save?" The best answer (besides directing you to your nearest Certified Financial Planner) as always, is, "it depends." It depends on:

What you plan to do after leaving your current employer
What financial obligations you expect to have at the target time period (for example, college tuition, dependent care expenses, on-going mortgage payments, etc.)
Whether you have any pension benefits from current or past employers
Whether you will have post-retirement health benefits from a current or former employer
What other potentially liquid resources you have or could have access to
What Social Security benefit you expect to receive (which depends on the age at which you start to draw benefits as well as your faith in the system to remain solvent by the time you need it!)
How long you live without earning any additional income

Consider this, however: Hewitt Associates, a global HR outsourcing and consulting firm, recently reported that many U.S. employees may need to work longer and save more for retirement due to increased cost of retiree medical benefits and elimination of pension plans. This hits close to home. In a recent The Singer Group library benefits survey, less than half of the public libraries surveyed had traditional pension plans. Virtually all that did retain a defined benefit pension plan concurrently offered a defined contribution plan. Of those that did retain a traditional defined benefit pension plan, most of those libraries were under state or local government benefit plans. This is consistent with Hewitt’s findings, in which they noted that only 68% of employers were offering defined benefit plans in 2003 as compared to 85% in 1990. Fortunately, for the most part, employers eliminating pensions plan have offered a tax-advantaged employee savings plan (401(k), 403(b), 457) in its place. Unfortunately, more than 30% of eligible employees do not currently participate in their employee savings plan.

A rule of thumb under the old "retirement" concept was to plan for replacement income from all sources to exceed 75% of pre-retirement income (excluding health care costs) to maintain a comparable standard of living. Better than a rule of thumb, many people turn to on-line calculators for estimates of future needs which can be translated into current monthly savings. The Social Security Administration provides a site (www.ssa.gov/planners/calculators.htm) which will indicate projected benefits based on the age at which benefits are first drawn. The American Savings Education Council (www.asec.org/ballpark) provides a site which will project post-retirement income needs and resulting annual savings rate to meet those needs. Other calculators are available through mutual funds and, most likely through the employee savings plan administrator.

The biggest drawback to using retirement calculators is, like the state lottery, you gotta play to win. The American Savings Education Council estimates that almost one-third of both pre-retirees and retirees have saved less than $50,000; 12% of retirees and 17% of pre-retirees have saved between $50,000 and $99,000, totally insufficient for funding a long and healthy average of 20 years past age 65. The simple answer to this dilemma is save. For employees just entering the work force, save for the long term. For employees who have been in the work force awhile, it’s time for some catch up savings. By taking advantage of all employer-sponsored deferred compensation plans, net savings build up faster. Understand the effect of compounded interest and investments—that a dollar invested today will be worth much more over the long term and by the time it’s needed.

External/Internal Needs

"A journey of a thousand miles must begin with a single step," said Lao-tzu over two thousand years ago. The first, single step when considering subsequent life stages is finding areas of interest—those things we’d really love to do. As the thousand-mile hiker prepares for a journey by filling up a backpack with food, water, first aid provisions, sleeping bag and tent, our journey requires equally serious preparation. To be totally prepared for recommitment, with the maximum possibilities available, we must fill up our lives with skills, knowledge, experiences and networks - resources to draw upon time and again at different forks in your road. It’s a matter of constant planning for the future and preparation to create the most potentially open doors for the future. Good planning and implementation lead to many alternate futures. Throughout the journey, we need to:

Try something new. Shake off those "shoulds" and "should nots" which float in our heads. There’s generally very little risk in trying a new hobby, a new part-time job, a new volunteer assignment. There are no Olympic judges rating performance and the stakes on whatever we might try are lower than you think—unless the goal is neurosurgery!
Participate in community service. By serving others, we create a sense of higher purpose and stay vitally connected to others. We sense our place in the world relative to others. We appreciate our blessings relative to the difficulties of others and gain perspective.
Practice life-long learning. Whatever we learn today and apply in our jobs or interests today may be redeployed in another capacity tomorrow. All learning adds to our total portfolio of knowledge, skills and abilities, ready to be a valuable asset in a new setting of our choosing.
Manage your health. Building an exercise regimen at any age creates a healthy lifestyle that can become a good habit, prevent many illnesses and keep you active for many alternate futures. Practicing good health "preventive maintenance"—scheduling those routine examinations and tests—will help us avoid some medical problems or contend more successfully with those squarely on the path.
Create a vision. We must create a vision of who we want to be at every stage in life. We should envision our dream job or hobby and how it fits into the rest of life.
Cultivate a network. People we know know someone else. Everyone has some need which can be met by someone else’s resources. Meeting and knowing a deep and broad network of people gives us access to infinite resources and allows us to share our resources with others.
Seek happiness. In his book, Fireproof: You’re in Charge of Your Career , Charles White says that "you can make the decision to be happy." And happy people are less self-focused, less hostile and abusive, more loving and forgiving; more trusting, energetic, decisive, creative, sociable and helpful. Choosing happiness is a simple way to plan the next stages of life.

Life is a journey, not a destination. Planning all along the way, start to finish, and acting on plans, will leave options wide open. Building financial, intellectual, spiritual and social capacity at every age is the best strategy to prepare for all eventualities and allow us to follow the paths that tug at our hearts.

Paula Singer and Linda Goldberg are with The Singer Group, Inc., a human resources, compensation and organization design consulting firm. They can be reached at (410) 561-7561.

What good advice have you heard and/or heeded for retirement? What questions do you have? Send them to the Editor or Paula and Linda.