Money Mindset

Chapter 3 New Retirement Paradigm

In this chapter we look at how retirement has changed, and why it will be different from our parents’ and grandparents’ retirements.

Throughout this book, I emphasize that money is energy and that we all have our own psychology about money. You have learned what elements contribute to your attitudes about money as well as how your financial behavior is impacted. Most of us realize that we will have various financial challenges as we approach retirement. We need to think about how to design a plan that supports each individual—a plan that evolves as our needs and desires change.

Perhaps Eric Hoffer, an American philosopher who was awarded the Presidential Medal of Freedom in February 1983, said it best: “In a time of drastic change, it is the learners who inherit the future. The learned find themselves equipped to live in a world that no longer exists.”

The Coming Crisis in Retirement Planning

We are entering a new paradigm. The retirement of our parents is no longer the reality of what our own retirement will look like. And the rules of the game from prior decades are no longer relevant. According to Robert C. Merton, a Nobel Prize–Winner in Economic Sciences, there is a coming crisis in retirement planning. Merton says, “Our approach to saving is all wrong: We need to think about monthly income, not net worth.”¹

Merton is correct in stating that the traditional approach to saving is misguided. The challenge—and the goal—is to design a custom ...