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By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
10th September 2010

The "R" word – retirement not recession - is being redefined around the world in the wake of the global financial crisis.

Retirement was such a straightforward concept a couple of decades back – you worked until your 65th birthday, picked up the gold watch, loaded up the four-wheel drive and headed off for well-earned leisure time.

But as is their wont the baby boomer generation rewrites each generational rulebook as it passes through the next phase.

Social researchers began to pick up the signals early that baby boomers were looking at retirement differently – indeed the big attitudinal shift was that baby boomers were rejecting “retirement” of the stereotyped gold watch ilk as something their parents did but they were not signing up for. Seachange was a remarkably popular TV series for a good reason – it resonated with the idea of opting out of the mainstream and slowing things down while not stopping productive, stimulating work.

 In a week when the unemployment rate in Australia fell to 5.1% is therefore interesting to read some US investor research that offers a new definition of retirement.  Recent research in the US shows that many people now define retirement as “when I’m unemployable”.

That suggests the twin impacts of the global financial crisis on people’s retirement plans – the dramatic fall in portfolio values means people are realising they simply cannot afford to retire so need to keep working for as long as they can.

A leading financial adviser provided an interesting case study recently. In his experience over more than 20 years he has seen a shift from where financial plans were built around a “hard” stop at retirement age – and the questions of adequacy at that point drove key financial goals that went into the financial plan – to today where increasingly the income projections are tapered down say from 60 to 70 and perhaps do not stop totally until mid-70s or even past age of 80.

That he sees is driven as much, if not more, by lifestyle choices and desires as the need to preserve or rebuild superannuation balances.

Clearly health issues are an important factor in this type of planning and become a greater risk if people do not have adequate savings and are reliant on ongoing employment income to sustain their lifestyle.

But at a time when the employment numbers suggest the Australian economy is getting close to what economists regard as “full” capacity the notion of part-time and more flexible working arrangements for older workers looks like it will become an increasingly important component in people’s financial planning for life-after full-time work - just don’t call it retirement.