I recently read a couple of interesting article discussing some of the potential flaws in our standard view of retirement planning. One of the main points the author made was that we tend to think about retirement in a very one dimensional way i.e. we save as much as we can, for as long as we can, until we can afford to stop working forever, and live happily ever after. One of the problems is that this doesn’t accurately reflect what we know about the way that we actually experience this change.
For many people, work is an integral part of their identity, and full retirement can mean they become depressed or disengaged. In addition to this, many people would prefer to have more leisure time while they are young and healthy as they may want to travel to remote locations. Others may just like the idea of ‘spreading out’ the leisure time they have available to spend with family or pursue hobbies over a longer time frame.
There are a number of alternative retirement lifestyles and strategies that may be suitable for some people. Some of these include:
• Traditional retirement – Work and save until retirement age (e.g. 65), and then draw all required income from savings.
• Early retirement – Work and save an increased amount, retire earlier than the traditional retirement age, and then draw all required income from savings.
• Semi retirement – Work full time until a certain age and then move to part time work. Part of the required income can come from earned income, and part from savings.
• Temporary retirement – Work until a certain age, and then retire for a period of time. Once savings start to run low, go back to work for as long as required.
• Sabbaticals, or mini-retirements – Alternate between working and not working for the entire working life. For example, work for 5 years, take one year off, and then go back to work for another 5 years.
• Encore careers – Work in a more highly paid industry until a certain age, and then move to a different industry that may be less stressful or more emotionally rewarding.
Obviously each of these comes with advantages and disadvantages which need to be traded off. In addition to this, if our plans are to work longer in some capacity, we need to allow for any possible future health issues that may cause this not to be possible.
It’s important to note that these are not necessarily ‘set in stone’. For example, we can take parts of each of these and mix and match them to suit what we think would be appropriate and most enjoyable depending on our financial situation, and desires at the time.
Written by Dallas Davison.
Dallas Davison, Michael Hogue and Ali Hogue.