The last two years have been a scary time for most investors, and particularly those close to, or in retirement. However, the truth is, what has occurred has created a new retirement mindset that may have tremendously positive results.

While there’s likely little we can do about what has already happened, this widespread pessimism felt by so many may have a slight upside: perhaps there was too much unwarranted optimism going into this, and now people have a much more realistic outlook about what lies ahead.

Regardless, it is what it is, and now as we move forward, a shift in thinking is imminent. Whether it’s how we plan financially, how we figure our benefits, when to retire, and what we retire to, it’s all in need of being reconsidered … and frankly, most of us have had little exposure in how to prepare for any of it.

The reality is, the whole concept of retirement and aging is scary to most people. But maybe it’s more the fear of the unknown, than the actual issues specifically. I think one of the benefits already occurring from this tumultuous recession is not only an increased awareness of the importance of both financial and retirement planning, but also on longevity as well.

While some aspects of retirement and aging may seem scary, having the facts enables us to be realistic so we can plan accordingly. For starters, did you know the majority of people underestimate how long they’re likely going to live? With life expectancy pushing 80 today, people may spend as much as thirty years, or one third of their life in retirement -- longer than some people likely spent in their careers. Additionally, while the average American thinks they can retire on $250K, the reality is the estimated cost of healthcare in retirement for the baby boomers is $200K alone – just healthcare. As a result, there are now financial products designed specifically just to cover the cost of healthcare.

And with regards to benefits, it’s equally frightening. Since the majority of today’s workers don’t have pension plans like previous generations did during their working years, and fewer are funding their 401K plans, this likely means Social Security may become a primary source of income in retirement for a number of people. That is truly frightening.

Ready to get really scared? Social Security was never intended to be the primary source of income it is for so many people. In fact, the Social Security Administration estimates that only 8 out of every 100 people have adequate income in retirement after working 40 years!! And that’s before the baby boomer debt group gets on deck and the lack of pensions comes to play! While it was originally designed to replace only 40% of a person’s pre-retirement income, one-third of people 65+ today rely on Social Security for 90% or more of their income.

So … what’s the upside and where IS the good news in all of this you ask. We really need to rethink this whole thing. It’s time for a new strategy and mindset for retirement, and a new perspective of aging and longevity as well. 

People will likely be working longer … and that’s OK. We’re living longer, so we should expect to be working longer too. That doesn’t necessarily mean working stressful fifty-hour weeks, but I suspect working beyond age 65 will become standard for many. In fact, the retirement age for boomers to receive full benefits will soon be 67, with a reduction for those who retire early at 65 and even further reductions for those retiring at 62.

The financial advantages of working longer are certainly evident within the Social Security system, too. For example, when one retires at 62, there’s a 75% reduction in benefits versus waiting to take benefits at 70. That’s pretty significant.

Keeping oneself healthy enough to continue working to age 70 is part of the issue as well. In fact, the majority of people who retire early are doing so because of health reasons. Recognizing what we can do on a day-to-day basis to maintain our health is an equally important issue. And combined with the continued rising cost of healthcare, and a Medicare system on the verge of collapse, we have to do a better job of taking responsibility for our own health.

There’s definitely a health and wealth connection, too … the healthier you are, the wealthier you are. Not only are you saving money by not spending it on expensive healthcare, you also provide yourself with the opportunity of working longer to generate more income as well.

The truth is, the majority of people are facing a frightening reality in that they may outlive their money. However, there are options that may prevent this -- from rethinking how long we’ll work and what type of investment strategies to use, to working with a financial planning expert, this new retirement requires a plan, along with a change in thinking and behaviors, as well.

This new retirement isn’t so scary if you know the facts and take financial responsibility for it. Truth is, with all the good news about aging today, it could be the greatest time of your life.

Kelly Ferrin, gerontologist and author of “What’s Age Got To Do With It? Secrets to Aging in Extraordinary Ways” has been studying aging and retirement issues for over 25 years. She was one of the first to ever receive a degree in this field from the prestigious Andrus School of Gerontology at the University of Southern California, the top school in the nation for age-related studies.

website: kellyferrin.com ••• email: ageangel@earthlink.net