In 2005, Ameriprise Financial commissioned the New Retirement Mindscape® study, which examined how Americans ages 40 to 75 view retirement. The study demonstrated that retirement tends to follow a series of stages, each associated with its own emotions and needs.

Recently, Ameriprise revisited the stages of retirement with the New Retirement Mindscape IISM study. While people still expect to enjoy — or are enjoying — retirement a great deal, the 2010 study found consumers are generally not as happy, hopeful or optimistic as they were in 2005.

What a difference a recession makes.

Due to the economic slowdown over the last few years, it’s not surprising that people have grown increasingly concerned over their finances, with a measurable increase in anxiety and doubt. In comparison to 2005:

• Fewer pre-retirees say they are hopeful about their retirement (73% vs. 78%).
• Retirees are not as happy (78% vs. 87%).
• Retirees report they are less likely to be living their dreams in retirement (43% vs. 50%).

Stage 1: Imagination (15 to six years prior to retirement) – Forming ideas, setting goals, and saving money are part of this initial phase of the retirement journey. Respondents in the 2010 study feel less “hopeful” (71% vs. 81%) and “optimistic” (72% vs. 77%) about retirement than they did in 2005, given the recession and the accompanying concerns about job security. Still, people in this stage continue to have generally positive feelings with the majority reporting that they feel “happy” (84%) and “enthusiastic” (70%) about retirement.

Stage 2: Hesitation (three to five years prior to retirement) – This new stage in the retirement journey emerged after the economic and emotional upheaval of the recession. During this stage, people begin to visualize retirement and question their preparedness. However, they also accept that retirement day is approaching and are more likely to be taking steps to prepare than in 2005 – significantly more have turned to a financial advisor (54% vs. 33%) or have developed a written financial plan (50% vs. 35%). This may explain why people in this stage also report feeling more empowered than they did in 2005 (60% vs. 49%).

Stage 3: Anticipation (two years prior to retirement) – The excitement builds as retirement gets nearer. While one-third (35%) report feeling anxiety, people in this stage are also the most likely to feel “on track” for retirement (77%). This may be because they are setting aside money in their own savings/investments (83%) and working with a financial advisor (54%). Yet, as they approach retirement day, they tend to be more anxious than people in other stages and also more anxious than those surveyed in 2005 (35% vs. 23%).

Stage 4: Realization (retirement day and one year following) – While the first year of retirement was previously called “Liberation,” the optimism and excitement that once accompanied this stage have been muted by the recession. People in this stage report enjoying retirement less in 2010, as only 45% said they are living their dream in retirement compared to 65% who said so in 2005.

Stage 5: Reorientation (two to 15 years after retirement) – After the initial adjustment period, people redefine their expectations and plans. At this point, happiness tends to increase, as people feel more on track than in prior stages. They feel better prepared financially than in 2005, as more of them have set aside money for retirement (83% vs. 72%) and more are working with a financial advisor (43% vs. 34%).

Stage 6: Reconciliation (16 or more years after retirement) – Feelings about retirement shift during this later stage, as health concerns and a loss of social connections lead to a greater sense of emptiness. While the vast majority of people in this stage continue to feel “happy” (80%), they are enjoying retirement significantly less than those in other stages. Compared to 2005, people are also less optimistic (66% vs. 78%), and less hopeful (68% vs. 80%). Biggest Pre-retirement Concern: Health Insurance
Those in pre-retirement expect that health insurance will be the biggest concern in retirement. During the Hesitation stage, 46% cite health insurance concerns as the worst thing about retirement, more than double the second-most cited concern, loss of social connections. But health insurance concerns drop dramatically once retired. By the time retirees reach the Reconciliation stage, health insurance concerns are cited as the worst thing about retirement by only 10% of respondents.

A Seminal Moment in Retirement Readiness: The Layoff
Given the economic slowdown over the past few years, more people in 2010 reported a career setback like a layoff. The number who cited this experience as the one event that caused them to think seriously about retirement also rose to 9% from 4% in 2005 – a significant increase. Other “trigger” events included a significant birthday, followed by health issues and the death of someone close to them.

The New Retirement Mindscape II study demonstrates the complexities of the retirement planning process, including how emotions can rise and fall based on people’s point in the retirement journey. However, it also delivers some good news. It appears that the economic downturn has encouraged many people to plan more proactively for retirement. By better understanding the stages of retirement – and preparing for them both emotionally and financially – consumers and the financial professionals who advise them can plan more diligently for this major milestone. The result may be a more fulfilling and confident retirement throughout all its stages.

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Michelle L. Heide, CFP® Financial Advisor Patton, Heide & Associates, a financial advisory practice of Ameriprise Financial Services, Inc. 1318 Route 31 North Second Floor Annandale, NJ 08801 908.713.4903      This communication is published in the United States for residents of New Jersey only; and this advisor is licensed only in the states of NJ, NY, NC, PA, MA, MD, ME, FL, CA, and CT.      This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.      Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.      © 2009 Ameriprise Financial, Inc. All rights reserved. File # 76796