KEY TAKEAWAYS:

• The traditional picture of retirement painted with a monotone brush of leisure and dependence doesn't capture the vibrant kaleidoscope of possibilities it truly represents.
• Retirement today is about empowerment and choice.
• Retirement doesn’t have to be a complete withdrawal from engagement with the world.  It can be a transition where you change how you engage.

For most of the twentieth century, the meaning of retirement was often seen along these lines: you hit a certain age or years of service, walk away from work completely, and hope your retirement savings, pension, and Social Security will be enough to cover the bills.

Unfortunately, too many still cling to this outdated traditional view of retirement, where one ceases work and becomes mostly reliant on retirement savings to eke out some sort of restrained, linear existence. But today’s reality looks very different. Longevity is increasing, and traditional sources of retirement income such as employer pensions are disappearing. 

As retirement planning specialists, we believe that the definition for retirement should be updated to reflect current times where some people are choosing semi-retirement, encore careers, or other ways to create a sustainable retirement that better aligns with their goals and lifestyle.

The Traditional Meaning of Retirement In the Past

The traditional meaning of retirement evolved from the 1950s and 1960s when retirement was defined more by the formulas and social norms of Social Security, pensions, and Medicare — but it is just not so today.  

Tremendous advancements in health care and medicine have led to a healthier population with a greater life expectancy.  This combined with the fact most jobs today in the United States require less manual labor, enable workers to remain productive much longer than in the past.  Moreover, technology and tight labor markets have made part-time and virtual work a viable and more plentiful option for many.  Gone, too, are the social norms of retirement as defined benefit pension plans have steadily given way to defined contribution plans such as 401k’s and 403b’s as well as IRAs.    

The traditional picture of retirement painted with a monotone brush of leisure and dependence doesn't capture the vibrant kaleidoscope of possibilities it truly represents.  It's time to dismantle these outdated notions and embrace a more dynamic view of what retirement can be.

Times Have Changed: The Meaning of Retirement Today

Retirement today is empowerment.  Today, retirement means having the financial freedom to make choices that can lead to greater life satisfaction.  Financial freedom does not necessarily mean you have enough resources to sail off into the sunset  — or that you even want to sail off into the sunset — but rather that you have enough resources to yield flexibility to make choices to improve your life’s satisfaction now.  Tomorrow is not promised.     

Retirement can be a transition.  Retirement doesn’t have to be considered a complete withdrawal from engagement with the world.  It can be a shift in how we engage, reducing hours to part-time, shifting work to more virtual hours, prioritizing passion projects, or starting a venture fueled by accumulated wisdom and experience.  The possibilities are as diverse as the individuals. Being aware of the possibilities and planning in advance to take advantage of them can be an important part of mentally planning for retirement to reduce unnecessary stress or the sense of losing purpose that some people feel when they retire without considering what their ideal lifestyle would look like. (Learn more in our Insight “7 Ways to Mentally Prepare for Retirement.”)

Create a Personalized Retirement Formula

Retirement planning in this context is really life planning.  Work-life and retired-life are two parts of the same life.  We now have retirement income planning tools that don’t force us to differentiate for the sake of retirement planning.  Instead, we can blend these two life periods so that you can find and achieve the best of both worlds.  

For those who want the challenge, meaning, and fulfillment work can bring, perhaps striking a better work-life balance so that you may also enjoy the pleasures that free time can provide is the ticket.  With this kind of semi retirement, it is okay to work less and subsidize your income needs using accumulated savings.  We recently helped a new client who wanted to start slowing down realize they did not need to be fully retired to start using their retirement savings, which were already far more than they needed.    All of this can be mapped out as part of the retirement planning process to ensure that you’re able to use those savings now and still have enough resources to sustain you for the rest of your life. 

For those feeling stuck in an undesirable job or with a poor work-life-balance, levering your resources to cut back or find new, more enjoyable work that you can sustain for longer, even if it pays less.  Retirement isn't confined to a one-way trajectory.  It can be a time of exploration, reinvention, and even pivoting to entirely new careers or endeavors.  There are so many different formulas that are uniquely individual. 

How A Retirement Planning Specialist Can Help You Balance Your Formula

Clearly, not every combination of the different semi-retirement and retirement options is workable.  So how do you figure out a formula that will allow you to reach your retirement goals, given your current resources? This is where we, as retirement planning specialists, use a computed measure known as Retirement Spending Capacity to assess what is actually possible.  

Your Retirement Spending Capacity is a scale of sorts that can be used to balance all the variables to see what is reasonably possible and what is not.  Your Retirement Spending Capacity takes into consideration all assets, income sources, risk tolerance, longevity assumptions, and willingness to be flexible to yield a sustainable spending dollar amount.  We can then compare this sustainable spending dollar amount to your Retirement Spending Plan (the amount you need and want to be able to spend in retirement to fund your ideal life) and reconcile as necessary. 

Further, you can explore a range of spending capacity outcomes by altering your assumptions.  You can see what various tradeoff decisions mean in terms of actual dollars and cents.  Retirement Spending Capacity is the measure that gives you the control and the ability to fine-tune a plan until it is just right for you. 

If you would like help finding and balancing your formula, we are here to help. Click here to schedule an informal, introductory Zoom call  with one of our retirement planning specialists to get started.