By Mark Miller

Chris Farrell is an optimist, so when he talks about the Great Recession he looks for the silver lining.

The economics editor for public radio's "Marketplace Money," Farrell thinks the recession is ushering in some very healthy changes in our consumer behavior and personal financial habits. The debt-and-consumption driven 1990s are giving way to a more sustainable lifestyle.

He describes the changes in "The New Frugality " (Bloomsbury Press, 2009), a book that should strike a meaningful chord for anyone planning to retire in the coming decade.

The new frugality, Farrell says, is based on values that are good for pocketbooks and for the environment at the same time. The core of his argument is that a conservative approach to consumerism leads to green decision-making, such as downsizing your home, using energy-efficient appliances, recycling and using public transportation instead of cars.

And from a pocketbook perspective, Farrell's frugality doesn't mean pinching pennies; instead, it means spending on quality--buying the best you can afford but no more than you need.

I asked Farrell how the new frugality impacts people heading into retirement. He responded by outlining several key emerging trends:

1. Living on less. Farrell sees important lessons in the economic crash that should help reshape our thinking about retirement in the years ahead. Over the past couple of decades, the big message about retirement planning was this: Invest in the market so you'll have enough money to support a rich retirement lifestyle. Now, Farrell sees a more balanced approach emerging, with less emphasis on consumption.

"There has been a lot of fear stoked by Wall Street because it's in their interest to get people to buy stocks. But most of us end up wanting to live the life we've lived before retirement. If you've worn blue jeans and a t-shirt all your life you probably don't need a down payment on a country club as part of your retirement plan."

"People are more creative on the spending side than we them give credit for. As people get closer to retirement they are finding that they can do more to adjust their spending than they thought."

2. Redefining retirement. Farrell's new frugality also involves pushing back the timeline to retirement. We'll be working longer, which can have a very positive impact on living standards. But we'll also be redefining the nature of work at midlife.

"You may want to say goodbye to your job, your boss or the building you've walked into for the past 10 years, but that doesn't mean you won't want to be doing things," he notes. "You're still going to want to work, but perhaps at something where you're earning less income but enjoying it enough that you can keep doing it until your 70s."

The new non-retirement also will prompt people to make new non-financial investments in themselves. "What kind of practical investment can you make in yourself to make a career change happen?" Farrell asks. "What networking do you need to do, and what education do you need? Do you need some classes at a community college? Should you be volunteering at an organization where you might want to work in the future? We need to redefine retirement investing as investing your time, not just your money."

3. Preparing for the next downturn. Farrell says its imperative for Americans to learn the right lessons from the crash, and get ready for the next downturn. "The decade of the '90s was the longest post-World War II expansion, and it lasted about nine years," he says. "It's reasonable to assume another downturn before you retire."

"Don't go into a bunker over the next couple years, but take some steps to make yourself less vulnerable to the next downturn," says Farrell. That means whittling away mortgages and any other debt ahead of retirement, and getting more conservative with your portfolio.

"I still like risk and equities but not a 'how much can I make' approach," Farrell comments. "Instead, ask what is the minimum standard of living you want to guarantee for yourself. Be sensible and reasonable."

Available at

The New Frugality: How to Consume Less, Save More, and Live Better


Personal Finance - New Frugality Emerging for Retirement

© Mark Miller


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