Three Big Ways Retirement Has Changed

21620144_sRetirement is not what it once was. Inheritance is no longer a sure thing to fund your golden years. Paying off a mortgage, once a rite of passage for retirees, makes less sense today. And forget the old saw that 65 is the right age to retire.  Increasingly, people are shying away from a date certain.

Let’s examine the new landscape of retirement:

Inheritance. So Gen X and Gen Y, are you expecting to fund your retirement with an inheritance from mom and dad? Aw, come on, isn’t that the real reason that you have not started saving as much as you should to fund your own retirement?

Well, have we got some bad news for you. According to an HSBC Bank survey of 16,000 people in 15 countries (1,000 from the U.S.), 23% of pre-retirees would like to spend their last dollar with their last breath, and let the kids figure it out on their own. Only 9% of the pre-retirees found it important to leave a legacy for the children.

However, respondents weren’t uniformly hard-hearted toward their offspring. Even those who want to spend everything think it is crucial to help children and grandchildren financially, to some degree, during their retirement. In the U.S., about one in 10 retirees support a child over age 16. Almost 60% of working-age Americans expects to leave something to heirs.

Mortgage payoff. At our firm, a prominent question from clients, as they head into retirement, is whether to pay off the mortgage. For many people, it generally makes financial sense after taxes to keep the mortgage, but traditionally most people just don’t want to make that payment every month. It just feels good to no longer pay the bank.

But today given the low interest rates and a six-year bull market, many retirees are choosing to keep the mortgage, or obtain one if they are buying a retirement home.

A recent study by Merrill Lynch and Age Wave, a research firm, reveals that 64% of retirees expect to move at least once and 37% have already done so. What’s more, 27% are seriously thinking about it.  And not all of this comes as a result of downsizing, as 30% of those who have already moved upsized to a larger home primarily to make room for visitors and family.

For those who do take out a mortgage, or keep one, make sure you understand all of the fine points before making this vital decision.

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