January 4, 2022
My grandfather Joe worked for a company called Thomas Steel for 30 years before retiring. When he retired, Thomas Steel gave him a pension that paid him a guaranteed income until he passed away. That pension was a pretty sweet deal, and truthfully, he deserved it. Joe loyally gave his time and energy to ThomasSteel, and they rewarded him with a comfortable retirement.
This is the way retirement used to look: you’d give your time and energy to a company and, if you stayed loyal, they’d reward you with a healthy retirement. Today, retirement looks a little differently.
Starting in the early 1980s, the 401k was introduced as a way for employees to save for retirement while deferring taxes on their savings. At the same time, the burden of saving for retirement began to shift from the employer’s responsibility to the employee’s responsibility.
Fast forward to today and retirement, and employee loyalty for that matter, doesn’t resemble anything like what my grandfather experienced. With this drastic shift in responsibility, the “new” traditional path started to look something like this: you save diligently from the time you enter the workforce (usually in your early to mid-twenties) until retirement, typically age 65 or later.
That amounts to four decades of working and saving at jobs we may not even be very passionate about in the first place with the hope of spending our twilight years trying to squeeze in all the things we want to experience. And a lot of those things may be harder to accomplish in old age than they would have been if we had done them when we were younger. I don’t know about you, but that doesn’t sound like the ideal work/life balance. Maybe it’s worth considering a different view on retirement completely. So, what other options should we be considering?
While there are a variety of options worth considering, I want to talk about a few that stand out to me that might provide you with some creativity for your own situation.
When you retire, you have a lot more time on your hands, which can be difficult to get used to. We see a lot of folks take this time to pursue hobbies, interests, passion projects, etc. Another option worth considering is semi-retirement. Semi-retirement means you switch from full-time work to part-time work prior to the traditional retirement age. This could be at your current employer, somewhere completely new, or with a non-profit you care deeply about.
For young people, retirement feels more than a lifetime away. It’s so hard for us to imagine age 65. I know older people tell us the time will fly by, and we believe them, but the 9 to 5 seems to drag on forever. What if, instead of waiting until age 65 to have free time, you took 6 months to a year off every 5 to 10 years? This is what my wife, Ellie, and I did in 2019. It was amazing to get a break from the grind of work for a year. It also gave us the opportunity to travel the world!
Now, you’re probably trading the time now for time later, but would you be willing to trade a handful of years throughout your working life for some years at retirement age?! I would! I did! I would gladly take a few years off while I can physically do the things I want, spend more time with friends and family, or pursue a passion, even if it means I’ll have to work longer than I would with traditional retirement.
I like to think of this approach like your breaks during work. Let’s imagine you get two 15-minute breaks and a half hour lunch throughout your working day. Most people wouldn’t wait until the end of the day to take all their breaks at once just to go home an hour early. Would you? This is how we approach retirement. Most people need to get up from their desks a few times throughout the day. Rather than getting up for a walk around the building, go for a trip around the world (or whatever gets you excited).
The extended sabbatical approach is basically the same as a mini-retirement, but rather than taking 6 months to a year, you’re taking a substantial amount of time off. Usually, folks will transition to a new career when they return to the workforce. Because of the gap in time working, you may have to start the new career at a lower position than you’re qualified for, but not always. This is a good option for someone who wants flexibility in their life and wants to try out different career paths throughout their working years.
Okay, okay. Hear me out before you say this is crazy! Working longer can take some of the pressure off when it comes to saving for retirement. Working longer gives you more time to save and more time for your money to grow. You’ll also have a shorter retirement to fund, which could mean less money needed for retirement. I think the trick to this option is finding a job that you absolutely love, you’re passionate about, and you can theoretically do into your senior years.
Because of the benefits of needing to save less for retirement, you can take a lower-paying (and hopefully lower-stress) job, which may open options for you to pursue your passions. You may be able to explore career paths that you previously dismissed because the pay wasn’t appealing. If you could work a job you’re really passionate about, would you be willing to do that work into your 70s?
Now, there’s a lot of pitfalls to these less-traditional retirement options, but with a strong financial plan and some dedication, these options are certainly realistic. There’s two points that get me really excited about these types of retirement plans. First, with some dedication, you can put yourself in a position to choose passion over paycheck, and that’s really exhilarating. Secondly, to quote author Mitch Anthony, “most people don’t want retirement, they want a healthy mix of vacation and vocation.” That’s exactly what these types of retirement plans can give you: that healthy work/life balance we’re all looking for.
Does a less traditional retirement sound interesting to you? Learn more about the process we use to help folks just like you plan for that balance between vacation and vocation.
You wouldn't wait until the morning of a flight to plan a trip.
Don't wait until retirement to make a financial plan.