Sherry Cooper - The New Retirement

THE NEW RETIREMENT

SHERRY COOPER is global economic strategist and executive vice-president of BMO Financial Group and chief economist, BMO Capital Markets.

Cooper has an M.A. and Ph.D. in economics from the University of Pittsburgh, where she was awarded a Mellon Fellowship. After five years as an economist at the Federal Reserve Board in Washington, D.C., she joined the Federal National Mortgage Association (Fannie Mae) as director of financial economics. Since 1983, she has been chief economist of BMO Nesbitt Burns. Cooper, a former member of the Barrons Economic Roundtable, is a frequent guest on CNBC, CNN, CBC, and CTV, and is widely quoted in leading business and investment publications such as the National Post, The Globe and Mail, Macleans, Canadian Business, The Wall Street Journal, The New York Times, Business Week , and Investors Business Daily . She is the author of the national bestsellers The Cooper Files and Ride the Wave . Visit her website at www.sherrycooper.com.

I am very pleased to share with you my insights on how boomers will be redefining retirement and shaping the future. This large demographic segment will have a dramatic impact in the years to come. As an investor, boomer, or just an interested observer, you may have also wondered about what the future has in store for you. I hope that this book provides you with a glimpse of whats to come and helps you prepare.

Sherry Cooper

Executive Vice-President, Global Economic Strategist,

BMO Financial Group

The baby boom has had a profound effect in changing societal norms and dominating economic developments and business activity, and nowhere more so than in Canada. While it occurred in other countries as wellmost notably in the United States, Australia, and New Zealandthe baby boom in Canada was the largest in the world. Similarly, the decline in birth rates following the boom has been the most dramatic in Canada; these two phenomenaboom followed by busthave meant that the boomers represent a larger proportion of the population in Canada than in any other country. During every stage of the boomers lives they have precipitated change, and the arrival of this generation at late middle age and the traditional retirement years portends new and significant economic, political, and social developments.

Boomers can be usefully divided into two age groups: leading-edge boomers born between 1946 and 1954, and the many more late boomers, born between 1955 and 1966 (or 1965 in the United States). As a group, boomers will redefine retirement just as they have redefined middle age. While much is made in the media about the oldest boomers moving into their 60s, this group is a relatively small proportion of the Canadian and U.S. populations. Most boomers are in their 40s, with another 20 years or so until traditional retirement . They still have kids to raise, tuition to pay, and debt at a level well above that carried by their parents at the same age, even adjusted for inflation. These 40-somethings have yet to reach their peak earning and wealth-accumulating years. A small percentage of boomers will retire in the next five years, but a far larger number will hit retirement in the 2020s. The crest of boomer retirement is not until 2025 .

In this book, I examine the Canadian and global economic implications of this aging population and its impact on government policy, business, financial markets, and society. As well, I zero in on the personal impact of aging and the coming reality for boomers and their families. I cover these issues for the United States as well, because of the close links between the U.S. and Canadian economies, the wealth of American demographic and survey data regarding retirement-related issues, and the fact that Canadians get much of their retirement advice and information from the U.S. media. In addition, most Canadian boomers who decide to spend a meaningful portion of their retirement living outside of Canada will likely do so in the United States.

But this is not your typical retirement book; this is not a personal finance book. There are plenty of those already. This book looks at the transition to late life and what it takes to achieve a successful final third of your life. A successful retirement for most peoplebe it at age 55, 65, or 75is to be physically and fiscally independent and active with love and purpose in their lives. Boomers are retiring retirement as people in our parents generation knew it. We will not settle for personal diminishment, social isolation, dependency, and inertia. In the new retirement, boomers will remain active in mind and body, and most of us will continue to be productive well into our eighth decade. Our later years will be more youthful and exhilarating than they were for any previous generation, as we are the healthiest and wealthiest generation ever to retire.

In The New Retirement I will examine how we can prepare for the last third of our lives to give ourselves the best chance of physical and mental well-being and financial security. We can age successfullyactually regenerate rather than degenerate . I will describe the key mid-life predictors of a happy, healthy late life. Most of these predictors are under our controlsome are behavioural and some are attitudinal. No longer is our genetic make-up or parental social class a sole determinant of our destiny. There are things we can do today that will increase the likelihood of our aging well, adding life to our years, as well as years to our life. There is a rapidly growing body of scientific research that explains the key processes of healthy maturation and a satisfying late life. Success in life varies from person to person, and it is much broader than simply success in work.

The research suggests there are benefits to aging, as stress diminishes and most people re-evaluate what is important in life. The impulse to be ostentatious and competitive typically wanes; the wise ones are more comfortable in their skin than ever before, and there is time to experience the beauty in the world and to nurture younger people and each other. Older brains are better at dealing with complex situations, having the benefit of so much experience. Emotions can be more easily controlled, and the opportunity to feel joy and have peace of mind is greater than at any other time in our lives. Many studies show that people who have aged well wouldnt want to go back to their childhood, teens, young adulthood, or the rat race years of career achievement in their 40s and 50s. Many are quite content to be right where they are in the life cycle. With advances in our knowledge about the aging process, many experts now believe there is no reason to suffer enormous and prolonged pain, degeneration, and inactivity before death .

Of course, financial planning remains a key component to successful retirement. I will show how to determine how much money you will need in retirement and what your options are to achieve that level of wealth. It is no longer considered necessary to shift from stocks to bonds as you near retirement, or that you should ever divest yourself of all of your equity holdings. Boomers have, for the most part, been notoriously bad savers; I will show you some ways to fast-track your retirement savings and stretch the value of your retirement nest egg.

Boomers were the new generation that transformed societal and cultural norms as well as politics. Boomers are far less traditional and conservative than their parents were. We broke away from what our elders expected of us and challenged their assumptions from across the generation gap. Even as the radicals and free thinkers of the 1960s became the yuppies of the 1980s, boomers continued to set new standards for themselves and their children. Unlike the previous generation, most boomers wont have worked for a single employer for 40 years. Many will have had multiple careers, and most do not have gold-plated, old-fashioned, defined benefit pension plans that guarantee a level of income for the rest of their lives.