Retiring? Stay healthy, keep working, live simply

The classic three-legged stool approach to retirement security – employer pension, Social Security and personal savings – is looking wobblier than ever these days.

Traditional pensions are disappearing fast, the long-term outlook for Social Security is cloudy, and retirement accounts have been walloped by stocks' steep decline.

The turmoil in financial markets has wiped out some $2 trillion from Americans' retirement accounts since the middle of 2007, the Congressional Budget Office said earlier this month. That's more than 20 percent of their value.

“This is certainly the most uncertain time in many decades for people approaching retirement,” said John Nelson, co-author of “What Color Is Your Parachute? For Retirement” with Richard Bolles, who wrote the best-selling “What Color Is Your Parachute?” career guide.

Nelson, 49, a retirement researcher and lecturer in consumer science at the University of Wisconsin, created a retirement model that has been selected for the retirement readiness program for federal employees.

His Retirement Well-Being Model is a research- and philosophy-based tool designed to factor in health and happiness, as well as finances, as people plan and set goals for retirement.

Here are excerpts of his comments in an interview Tuesday:

Q. What general advice do you have for people in their 50s and 60s who have seen their retirement accounts shrink and now figure they will have to delay retirement or scale back their goals?

Start taking better care of your health. It's easy to say you're going to work longer, but many people effectively retire because their health deteriorates to the point where they can't work anymore.

Do some type of assessment that gives you specific insight, from a biological perspective, about changes you could make to improve your state of health. A site that I like is That's a very specific, science-based tool that allows you to do some planning for your own health in retirement and gives you a better idea about whether you really could be healthy enough to work those extra five years if you need to.

Q. You recommend an alternative to the three-legged-stool approach to financial security in retirement. Describe your approach. What are its advantages?

The acronym is PERKS, for the five primary sources of retirement income for most people: The P is personal savings, E is employer plans, R is real estate, or your residence for most people, K is keep working and S is Social Security.

Those additional two sources are how you turn the shaky three-legged stool into a more solid five-pillared model. The more sources you have to plan for and to build up over time, the more flexible your retirement will be.

Q. Besides saving more money, what is the single most important strategy for planning a fulfilling retirement?

Especially in light of the new economic situation, many of us thought we'd simply be able to consume happiness in retirement, because we'd have plenty of money to buy and do the things that we wanted.

What this is helping us to see is that the other forms of happiness come from being engaged with life, through work or volunteering or social relationships.

Those are paths to happiness that do not require as much income as the idea of just buying a fun, happy retirement.

So if your retirement income is going to be reduced, you may have to look for free or lower-cost but ultimately more fulfilling ways to spend your time than consuming.

Q. What can you do to address a big drop in your portfolio if you are unable or unwilling to continue working full time in retirement?

Delay accessing your retirement accounts through whatever means, and that's probably working part-time. Just giving your portfolio time to rebound is at least as important as trying to save more.

At least on a temporary basis, you can replace the income you would have been drawing from your portfolio.

If your portfolio is down $100,000 and you're on the verge of retiring, if you earn just $5,000 from a part-time job for the first few years of retirement, that can help replace the income you would have drawn from that missing part of your portfolio.

Q. How might people who already are retired need to reduce their plans and expectations amid what's happened recently?

The real question, if you are going to have a reduction in your retirement income, is how do you approach that. You can approach that as involuntary poverty: You can see yourself as wanting to live at a higher-consuming lifestyle, and you're being forced to live at a lower standard than you'd like, which would be a pretty unhappy way to live.

Or you can start thinking along the lines of the voluntary simplicity movement, which is the idea of consciously creating a life that's outwardly simple but inwardly rich.

So it's your choice: involuntary poverty or voluntary simplicity. It's mostly the way you look at it.