Transitioning away from the idea of traditional retirement

February 8, 2010


For many people, the idea of retiring is the ultimate goal.  You imagine your days spent like a Corona commercial, on the beach and enjoying the freedom of having nothing to do.  However, I believe the reality of retirement is quite different from the way people imagine it to be.  As anyone who has taken a long vacation can attest to, being bored out of your mind can sometimes be just as stressful as having a full time job.  Without a reason to get up in the morning, you start to wonder what your purpose in life is.  If you retire without a plan, you can end up sitting in front of the television all day.  That’s probably not what you wanted for the final decades of your life.  That’s why I advocate the idea of semi-retirement over traditional retirement.

How does the concept of traditional retirement fall short?

The traditional retirement concept involves working until you are 65, at which point you stop working altogether and enjoy life.  For all the complaining that we do about work, it also provides us with some benefits other than money.   First, it provides us with a sense of purpose.  You feel good about yourself when you’ve accomplished something meaningful during the course of the day.  Second, it provides us with a certain amount of social interaction and human connection that we might not otherwise have.  Once you stop working altogether, you lose out on some of these intangibles.

If you’ve ever put the amount of money you need to save into a retirement calculator, it will probably spit out a pretty high number, assuming you want to maintain a certain standard of living.  I can safely assume this number is easily over $1 million.  That’s because the calculator assumes that once you hit 65, you will stop working, not earn any more income, and tap into your savings until end of life.  Since savings will be your new primary source of income, you need to save a substantial amount if you want to maintain your quality of life without any additional money coming in.

The third problem is that when you’re 65, well, you’re old.  Many of us want to enjoy life while we are still young enough to do all the things you want.

The solution?  Semi-retirement

Semi-retirement differs from traditional retirement in that when you transition into semi-retirement, you will still continue to work, but at a reduced rate than your current full-time job.  Your job in semi-retirement will probably be different as well, since you will probably explore ways of making money by doing things you enjoy.  This plan still requires that you save aggressively when you are young, since your semi-retirement income is meant to supplement your savings.    Semi-retirement offers multiple benefits.

1.  Since you continue to generate income, you can semi-retire earlier than you would traditionally retire.  Depending on how aggressively you’ve saved, you might be able to accomplish this transition in your 40’s or 50’s instead of waiting until you are 65.

2.  You’ve saved a good deal of money at this point, enough to live off of if you want.  Maybe it’s not enough to live quite as comfortably as you would like, but you understand how to live within your means.  Since you are no longer focused on earning as much as possible, your job in semi-retirement allows you to pursue your passions and experiment with things you are truly interested in.

3.  Since you are working a reduced rate (for example, you might decide that you only want to work 3 days/week), this still allows you the flexibility and time to get out and spend your additional free time as you wish.

4.  The benefits of having a job (social network, sense of purpose) are still there.

What are your thoughts?

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