This Is the New Retirement Reality in 2026
Experts say people should get ready for a new retirement reality.
A study from Manulife John Hancock Retirement found that as people live longer than ever and some retire earlier than expected, a 40-year retirement window is increasingly becoming the new norm. Meanwhile, as pensions go by the wayside, the “three-legged stool” retirement model of Social Security, pensions and savings is looking more like a two-legged stool.
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Reconsider the 4% rule
With the costs of goods and services on the rise, savers need to carefully consider whether the 4% rule — which involves withdrawing 4% from your savings in your first year of retirement before adjusting for inflation in subsequent years — makes sense with a longer retirement. The 25x rule indicates that you need 25 times your annual expenses to retire, and can be another way to determine how your cost of living should determine your withdrawal rate.
Aspiring retirees have to consider inflation rates for general goods and services, but also for health care, which is getting more expensive.
Reassess the 60/40 portfolio
For some retirees, the classic 60/40 rule makes sense in the new retirement reality. This portfolio model suggests you should have 60% of your money in bonds and 40% in stocks.
However, growth may be more important for some retirees than others. A 50/50 portfolio could allow you to balance growth with income, while a portfolio of 70% stocks could make sense for a more aggressive investor.
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Consider semi-retirement
The reality of retirement is changing, but so is the definition. While retirement is often depicted as not working another day of your life, semi-retirement challenges this concept.
Picking up a part-time job can provide extra income and help preserve your nest egg. It’s a way to mitigate risk while keeping yourself active. Retirees can choose several part-time gigs that have flexible hours or offer remote work. These opportunities often don’t have the same rigid schedules as traditional jobs.
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Look into longevity insurance
Since people are living longer, some are turning to Qualified Longevity Annuity Contracts (QLACs) to receive steady payouts deep into their retirement years. You can start a payout date as late as when you turn age 85. Longer deferral periods increase the size of future payouts, like with Social Security.
Be flexible
The new retirement reality suggests that it will take more time — and potentially more effort — to have a sufficient nest egg. Rising costs and increased longevity make it imperative to consider new rules of thumb when it comes to savings strategies.
Being flexible and getting your finances in order can help ensure that you can retire when you are ready.