“Retirement is a time to relaunch, reengage and reinvent. It’s about doing things and giving back in ways that you weren’t able to do in the previous decades of your life.” – Kerry Hannon, Author of Never Too Old to Get Rich
Key insights from “Four Pillars of the New Retirement”, by Edward Jones and New Wave include:
- Nine in ten Americans feel that there should be more ways for retirees to use their talents and knowledge for the benefit of their communities and society at large
- Almost 70% of those who plan to retire in the next 10 years say they have no idea what their healthcare and long-term care costs will be in retirement
- Twenty-four million Americans have provided financial support to adult children due to the COVID-19 pandemic
- Seventy-one percent of retirees are willing to provide financial support even if it jeopardizes their own financial future
- Alzheimer’s and mental decline are the most feared health conditions of later life among retirees, ranking higher than COVID-19, cancer, heart attack and stroke
The new retirement is becoming an exciting and fulfilling stage of life—full of new choices, new freedoms and new challenges. The timing, shape and meaning of retirement are transforming. Once viewed as a time to wind down, retirement is increasingly a time of new choices, new freedoms, new purpose and new challenges. Recent research continues to reveal that, more than ever before, retirement is far more than a destination or an end point; it’s the beginning of a new journey filled with new twists and turns as well as new possibilities and new questions.
What makes today’s retirement “new”? Increasing longevity means more people with longer retirements—making retirement a more important stage of life. Two-thirds of all the people who have ever lived past the age of 65 in the entire history of the world are alive today, according to the information calculated by Age Wave in 2016.
Four Pillars of Retirement
There are four areas (dubbed the Four Pillars) that impact the quality of life in retirement: health, emotional well-being, purpose and finances. Achieving your ideal retirement requires thought and action about each of these pillars, according to Edward Jones.
All working people, especially pre-retirees, need to understand that the quality of their lives in retirement is rooted in what they do to improve their health, their relationships with family and friends, their sense of purpose, and their finances long before they retire. Then, in retirement, they must continue to learn how to improve and integrate the four pillars.
While in previous past decades, retirement often focused on the end of work and winding down. However, today’s retirees see themselves as having more freedom – freedom from many work and family responsibilities, and freedom to explore new options and pursue new interests such as travel and hobbies.
All four pillars are essential. Each plays a significant role in the overall well-being of retirees. Those who report having higher quality of life also grade themselves higher in terms of health, family relationships, sense of purpose and finances. And those reporting lower quality of life grade themselves lower in each of the four pillars. Individually and collectively, these four pillars enable people to thrive in the new retirement.
Pillar 1: Health
“Many Americans view retirement as a time to improve their health—in mind, body and spirit”…and, “it’s never too late to improve your health.”
Health influences all facets of life in the new retirement: where retirees live, whether and how they can work, how they spend their leisure, how much they can enjoy themselves and their families, and how much they can volunteer or take part in activities that give them a sense of purpose. Being healthy can also help protect retirement savings from the rising out of-pocket costs of health care and long-term care.
Part of what’s new about retirement is a longer lifespan and more years in this life stage. Good health offers choices. Unfortunately, most adults spend 10 years in poor health. The most feared condition in America is Alzheimer’s and other forms of dementia.
90% of Americans older than 50 say that being healthy is about being able to do the things you want.
Physical health naturally declines with age, but research shows that mental health psychological and emotional—actually rises. Overall, our health-spans do not match our lifespans, with older Americans living an average of 10 years in poor health. And cognitive or “brain” health is of supreme importance and worry for retirees. Alzheimer’s and other forms of dementia are the conditions they fear the most—more than cancer, a heart attack, or even infectious diseases like COVID-19.
Pillar 2: Emotional Well-Being
“Positive, meaningful and supportive relationships with friends and family are critical to health and quality of life in retirement.” Linda Fried, MD, MPH, Dean of the Mailman School of Public Health at Columbia University
Retirees consistently say family and friends are their greatest source of satisfaction, support, joy, and even purpose. Spending time with family— often grandchildren in particular—is always high on the retirement agenda. Families today are becoming more connected and interdependent, and the COVID-19 pandemic is bringing them closer still.
On the one hand, adults 50+ worry about becoming a burden on their families and friends. On the other hand, they are willing to offer financial support to family regardless of how it affects their future.
72% of retirees say being a burden to their family is one of their top fears, but one in four Americans older than 65 have not discussed their end-of-life care preferences with anyone at all.
Most retirees draw their greatest nourishment from family relationships. And for most Americans today, family extends beyond blood relatives to include “families of affinity.” Generational generosity is the rule, with retirees willing to do whatever it takes, personally and financially, to support family members in need, even when it means sacrificing their own financial security. Retirees without close connections to family and friends face greater risk of physical and social isolation.
Pillar 3: Purpose
“Purpose is feeling like the world needs you as much as you need it, that you have something to contribute and that you still matter.”
Purpose is inextricably linked with the other pillars, especially family and health. Retirees with a strong sense of purpose are happier and healthier, more active and more socially engaged, and they live longer.19 They have positive attitudes toward their own aging and life itself. They reject the ageist myth that retirement means a life in decline, instead making retirement the most meaningful and fulfilling time of their lives. They want to feel useful more than youthful. Retirees say their greatest source of purpose is from spending time with loved ones. They also value learning and growing. Yet now, with more than seven hours a day of free time, one in three new retirees struggles to find purpose in retirement.
89% of Americans feel there should be more ways for retirees to use their talents and knowledge for the benefit of others.
Retirees with a strong sense of purpose are happier, healthier and live longer. They report deriving their strongest sense of purpose from spending time with loved ones. They also face a new challenge and opportunity: how to use their newfound “time affluence.” They don’t just want to keep busy; they want to spend their time in useful and rewarding ways. And a striking 89% of all Americans agree that there should be more ways for retirees to help in their communities
Pillar 4: Finances
“Financial planning is about much more than money. It’s how you want the money to work for you, and what is most important for your life.” Dori Mintzer, Retirement Coach, Author and Speaker
The word “wealth” derives from the Middle English word “wele” for “overall well-being.” That’s a great reminder of the fundamental role of finances in people’s lives. For retirees, money isn’t an end in itself, but an essential means to the end of achieving wellbeing in retirement. Nearly half of retirees (46%) say the primary purpose of money in their lives is to provide security for the unexpected.
The role of money in retirement is to provide security and freedom. Over half of retirees wish they had budgeted more for unexpected expenses. When it comes to the unexpected, the cost of health care is more worrisome than a recession.
Two-thirds of Americans who plan to retire in the next 10 years say they have no idea what their health and long-term care costs will be in retirement.1
The financial goal of the vast majority of retirees is not to accumulate wealth in itself, but to have sufficient resources and cash flow to provide security and the freedom to live the lives they want. Many retirees find that managing money in retirement can be even more challenging than saving for it. Even in today’s volatile market, retirees’ greatest financial worry is the cost of health care and long-term care. The key to financial preparation is looking holistically at how one wants to live in retirement, not just how much money may be needed.
These four pillars are inextricably interconnected. Social relationships and sense of purpose can dramatically impact health. The greatest source of purpose comes from spending time with family. Retirees commonly support adult children and other family members financially — or are supported in return. Healthcare costs are a financial worry, and financial stress can negatively impact health. Sound health and finances enable retirees to engage in the relationships and purposeful activities they value most. The list of interconnections goes on. Each pillar influences the others, and together they are mutually reinforcing.
Takeaways
There are valuable lessons that can make for a better life in retirement. Research by Edward Jones and New Wave shows that there are four key ingredients—four pillars—to living well in the new retirement: health, family, purpose and finances. They are highly intertwined, and must be viewed and addressed holistically. They also change in retirement, so retirees need to continually recalibrate and adjust.
Retirees with higher quality of life more often view retirement not as a time to rest, as more of the same, or as the beginning of the end, but as an exciting new chapter in life. They don’t think of retirement as a destination, but a journey. They start imagining, planning for, even practicing retirement activities in advance of declaring themselves retired.
References:
- https://www.edwardjones.com/us-en/market-news-insights/retirement/new-retirement
- https://www.edwardjones.com/sites/default/files/acquiadam/2021-01/Edward-Jones-4-Pillars-US-report.pdf
- https://agewave.com/the-four-pillars-of-the-new-retirement/
- https://www.edwardjones.com/us-en/market-news-insights/wellness