The pensions paradox. Part 3

This is the last of a series of three columns that focus on issues that baby boomers will face in retirement. The first column reviewed the social security retirement plan (SSRP). The second column reviewed employer-provided, defined-benefit pension plans and their impracticality in an era of rapid technological change and fierce global competition. This column looks at ways in which individuals can accumulate and manage the resources needed to fund a reasonably comfortable retirement. The overall task is viewed as having three phases. These are the accumulation phase, the transition phase, and the consumption phase. The accumulation phase is conceptually straightforward. Advice that is promulgated widely by financial planners applies to almost everyone. The transition phase, in contrast, is very situation specific. It is a time when a lot of situational analysis, risk assessment, and risk abatement ought to occur. In practice, this phase is often neglected. Traditional retirement planning tends to assume that a farewell party occurs on a Friday afternoon and that regular weekday golf starts on the following Monday morning. Such an abrupt transition from employment to retirement is usually a bad idea, both financially and psychologically. The consumption phase involves monitoring the outcomes of plans that are established during the transition phase and making whatever mid-course adjustments are necessary. This column focuses primarily on the accumulation phase and the transition phase.