Three Types of Retirement
If you assume, for a moment, that reaching the moment of “retirement” doesn’t actually mean the end of work, but merely the end of a current job or career – opening the door to a new type of work instead (and, potentially, one where it matters less how much you make) – what you end up with is what J.D. Roth calls several different “types” of retirement.
The “traditional” type of retirement is the one that we’re all most familiar with – save early and often, invest prudently for growth, and retire as soon as you’re financially able. If you can grow your retirement portfolio fast enough, you can retire early. If not, you’ll at least have the opportunity to retire in your 60s when Social Security becomes available. The time in retirement is filled with leisure, or perhaps engagement through volunteer “work” (but without any financial remuneration).
One alternative, though, is a form of “semi-retirement”, where work is scaled back, but not eliminated. This might entail starting a business, pursuing a new career, or engaging in consulting or part-time work in a prior career. In essence, semi-retirement in this context means retirement from the current full-time job/work, but not necessarily from any work. In fact, some level of ongoing – and paid – work would be anticipated, which helps both personal fulfillment and wellbeing, and provides substantial ongoing financial assistance (which in turn means it may be able to happen earlier than traditional retirement)!
The third type of retirement is engaging in a series of “temporary retirement(s)” – in essence, sabbatical breaks that occur, with some planned regularity/periodicity, for a limited period of time, after which the individual returns to the working world (albeit in a potentially new job or career track). In this approach to “retirement”, the act of retiring – withdrawing from the working world – is not something that comes at the end, but instead is dispersed more regularly throughout the individual’s productive years, perhaps as transitions between extended careers. Depending on the individual’s inclination (or type of work, or chosen profession), the pace of sabbaticals could be less frequent but for longer periods of time, or for shorter periods that occur more often. The phase of retirement at the end would be shortened though, as those retirement years are intentionally “redistributed” into earlier phases of life.
We credit the above description of the Three Types of Retirement to well know financial blogger M. Kites aka the “Financial Nerd”.
If you can see yourself as being one of these three types then what is the main takeaway?
It directly influences how you will do your planning.
All of our relationships with our clients begin by “discovering” what a client wants to experience in retirement and a detailed analysis of how they will fare.
We only work with those who embrace and commit to first preparing a plan.