The changing face of the economy and the fact that people are living longer has some baby boomers and their financial advisors redefining the traditional concepts of retirement.

As the first big wave of boomers dive into this next phase of their lives, some experts are abandoning the term "retirement" altogether and redefining it as a third stage of life, longevity planning or lifestyle planning. The next few years will be a time of experimentation and innovation for boomers who are going to have to work these new scenarios out for themselves, according to the experts. Boomers have even been called the "guinea pig generation" by some, but that does not necessarily mean it is a bad situation.

"If the boomers are going to leave their fingerprints on the future in any way, it is that they are the first to have a consumer-driven retirement," says Joe Coughlin, founding director of the MIT AgeLab. "The baby boomers are the first to have to piece their financial future together on their own without the certainty of defined benefits and with the uncertainty of being sandwiched between the needs of care giving and living longer. The financial industry is going to have to make these solutions up as they go along to meet the new needs of older boomers."

The changes that are demanded can bring good things, according to John Diehl, CFP and senior vice president of The Hartford. "I am optimistic. The yacht is not the goal of retirement anymore. Advisors need to be talking about the issue of living longer and the products and strategies that will be emerging such as methods to provide sustainable lifetime income streams and preparing for long-term health and lifestyle expenses."

Those nearing retirement are facing more uncertainty, creating widespread insecurity, which was the name of a recent Hartford study entitled Social Insecurity: A Discussion of Retirement in America, in which both Diehl and Coughlin took part."This is a great opportunity for financial advisors. Most people do not even know what is available to them, and they may not know what not retiring in the classical sense combined with longer life means to their financial planning," Coughlin adds.

The time when people worked for a company for a specified number of years and then retired to pursue leisure activities was short-lived in American history anyway. Before the mid-1900s, work revolved around agrarian interests or small businesses and people worked until they were forced to stop.

"For our grandparents, there was no need for inflation adjustments in their planning, because they did not have a continuation of retirement," explains Servando (Sam) Llanio, with Constellation Financial Advisors in Towson, Md. "They had savings, retired for a while and then died in their mid-70s. It was a limited scenario in which the old pension plans and savings worked. Then you had a number of years where people defined retirement as leisure and no work in the classical terms. Now, one-third of a life may be spent in retirement, which means you need income-for-life models."

The longer life span may call for a portfolio of laddered bonds and holding some dividend-paying stocks to hedge against long-term inflation. Annuities can be taken out much later in life with ten-year payouts. Many retirees delay taking their Social Security as long as possible, which gives a guaranteed 7% to 9% bonus on the payments from the government. "Many people do not want to retire at 62 or 65 because they want to continue to feel useful," Llanio adds.

Now, with longer, healthier life spans, many people are looking to an entirely new phase of life when they approach their mid-60s. "We can change the face of retirement," advises Gary Gilgen, CFP, a senior financial advisor for Rehmann, one of the largest accounting and financial services firms in Michigan. Gilgen is the director of financial planning for the firm. "We have to take the focus off of investment returns during retirement and focus on cash-flow sources for the long term and balancing debt management levels with cash-flow management throughout their longer life expectancies. That is true if you are making $30,000 or $1 million a year.

"At Rehmann, after we analyze the client's situation, the client may realize he or she cannot retire at 62 like they had planned. They may have to work longer, contribute more money to retirement income sources, consider cutting back on expenses, take more risk in investments, consider different financial products available to them and/or do a combination of these things," Gilgen adds. "I don't think the word 'retirement' should go away, but we need to step back and look at it differently by providing varying sources of income streams. The days of just counting on Social Security and/or a pension are long gone. Advisors need to refrain from trying to sell a product or products and look at the clients' needs first, then come up with the solution for them."

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