Reinventing retirement: entering your 'second act' with confidence

Retirement, once seen as a time of leisure and repose, is undergoing a profound transformation in response to the changing tides of society, the economy, and our aspirations.

Not only are we living longer, but rapid technological advancements are changing how we live and work. Given these shifting paradigms, it's reasonable to expect the way we think about retirement to change as well. So what does retirement truly entail in the future, and how can we better prepare ourselves for a retirement that meets our objectives?

A new HSBC global survey, Quality of Life, found that 51 percent of people plan to work after their formal retirement. Counterintuitive? Perhaps. Surprising? Not so much if we take a step back and look at how the idea of a single, abrupt exit from the workforce is being challenged.

People are seeking opportunities for a phased retirement so that they can remain active and pursue their passions, but also because they face significant obstacles to achieving a traditional, work-free life, thanks to the unstable economic environment that lies ahead. The same survey identified declining physical health and the impact of inflation on savings as primary concerns when planning for retirement, underscoring just how important it is to tackle these concerns head-on and to adopt a holistic approach that encompasses both financial resilience and physical well-being.

Ideally, the 'second act' of our lives, our retirement, should be enjoyed without the weight of financial worries. For most of us, getting ourselves to a position where we can fully embrace this chapter from a position of financial security takes planning and preparation.

According to the survey, the majority of us, circa 55 percent, are already planning in some way. However, there's still a substantial average gap of 71 percent between what we anticipate needing to live a comfortable life and what we have saved. Rising living costs, the erosive effect of inflation on savings, and our desire to retire earlier while living longer all contribute to this gap.

Inflation silently nibbles away at the real value of our savings over the years, sometimes even decades. Even seemingly modest inflation rates can pack a punch, eroding our purchasing power. That's why we must take proactive steps to safeguard against it and bridge the gap in our retirement savings so we can focus on what's important to us.

To shield our hard-earned savings, we should consider smart investment strategies and suitable financial products. Diversifying our investments is a savvy move that helps us weather the storm of inflation and market volatility by spreading risks across different asset classes and geographies. By allocating funds to a mix of stocks, bonds, real estate, and other investments, we can potentially ride the wave of their growth and counterbalance the effects of inflation.

Moreover, creating alternative income streams can be the secret ingredient to securing a vibrant retirement. Investing in rental properties and exploring dividend-paying investments can provide reliable cash flow. These income-generating ventures act as a protective shield, helping us enjoy a worry-free retirement while making passive income.

Future-Proof Your Health

If financial security is the foundation, good health is the cornerstone of a fulfilling retirement. Taking a proactive approach to wellness helps us cultivate habits that promote longevity, vitality, and an enhanced quality of life. This includes adopting healthy practices like regular exercise, a balanced diet, stress management, and preventive health-care measures. However, it's not just about physical well-being; it's also crucial to be aware of the expected deterioration in health as we age, so we should consider insurance planning and health-care expenses as we plan for the future.

Health-care costs are a significant problem for many retirees, with 58 percent of survey respondents expressing concerns about health-care expenses after retirement. And rightly so, given the relentless surge in the cost of medical treatment, prescription medications, and long-term care services. To combat these mounting expenses, it is worth exploring insurance solutions designed to reduce the financial burden of health care in retirement.

Researching and selecting insurance solutions that address personal needs is key. Factors such as premium costs, coverage limits, prescription drug benefits, and access to preferred health-care providers should be considered. Long-term care services, such as residential care homes or in-home care, also come with costs. Long-term care insurance solutions can help protect retirement savings by providing coverage for these services. It's important to research different options and, as a rule of thumb, seek expert advice as part of one's overall approach to building a personal retirement plan.

Retirement is a transformative phase that can be whatever one makes of it; it's a life stage that invites growth and exploration when we can further redefine our identities, pursue long-held aspirations, and make meaningful contributions to society. Retirement is also transforming as a concept, and our planning must reflect this to ensure we have the flexibility to fulfill our changing retirement desires. By prioritizing financial prudence and planning, as well as approaching our well-being from a more holistic perspective, we will put ourselves in a stronger position to redefine retirement according to our objectives.

( The article is written by Lavanya Chari, global head of Investments and Wealth Solutions, Global Private Banking and Wealth, HSBC)