There used to be a singular notion of retirement: Walk away from your career one day and begin a life of leisure the next. You never envision working another day in your life. When planning for the retirement date circled on your calendar, you saved as much as you could for decades to ensure that you’d have enough money to comfortably live out your golden years.
This one-size-fits-all approach to retirement – and the financial planning that supports it – is rapidly changing.
People are living longer, healthier lives. Professionals generally don’t do the manual labor that made retirement a necessity for prior generations. So fewer people want a retirement of all leisure and no work. Instead, people of retirement age instead are working part-time, becoming entrepreneurs or shifting gears for some sort of “encore career” that takes their accumulated wisdom and experience and puts it to use in new and different ways.
As a result of these trends, three different types of retirement are emerging. And each requires a different retirement savings strategy. Here’s a look at traditional retirement, semi-retirement and temporary retirement and how we can help you navigate whichever path you choose.
Traditional retirement is just that. Close the door on work and never look back. This requires saving early and often and investing prudently for growth while tapping Social Security benefits as a backstop. The goal is relatively straightforward: Save as much as possible to reach your desired standard of living during a lengthy retirement that could last decades.
People who choose semi-retirement typically leave their chosen career but continue to work in some form afterwards, usually with scaled back and flexible hours that let them spend more time enjoying leisure activities. Semi-retirement can extend your retirement savings by many years and require a smaller nest egg. With income coming in, you can either delay or minimize withdrawals from your retirement savings until the day comes when you do finally make retirement a full-time gig. Earning $20,000 per year in semi-retirement, for example, can cut your total required retirement savings significantly.
Some people decide to take mini-retirements. These short periods of leisure are sandwiched between different careers or encore careers. You may take several months or a full year to travel, for example, before parachuting back into the world of work. This requires more complex financial planning. With temporary retirements, the retirement savings account never accumulates quite as high – and doesn’t need to because the periods of retirement don’t last that long. On the other hand, retirement savings never have as much time to grow and compound because savings are not continuous – and withdrawals begin sooner.
A wrinkle in semi-retirement and mini-retirement scenarios involves disability insurance. If you’re going to save less for retirement and work longer in some fashion, then you’ll need to pay for disability insurance for longer than if you were taking a traditional retirement. People who choose mini-retirements, meanwhile, also may need a larger pot of emergency savings to rely upon while they are in between jobs.
The bottom line is that we can help you pursue whichever type of retirement appeals to you. We’ll be happy to go over your options and do the financial planning that can show you what’s required to reach your retirement goals – no matter what shape they may take. To get started, contact one of our advisors today.
*Past performance is not an indicator of future results. This material is not financial advice or an offer to sell any product. The statements contained herein are solely based upon the opinions of Elevage Partners, LLC (“Elevage”). Elevage is a registered investment adviser. More information about the firm can be found in its Form ADV Part 2, which may be requested by calling (877) 922-8243 or visiting http://www.adviserinfo.sec.gov. The information contained herein is derived from sources we believe to be reliable, but which we have not independently verified. Elevage assumes no responsibility for errors, inaccuracies or omissions in this information. Elevage reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive. It should not be assumed that any of the securities transactions, holdings or sectors discussed were, or will prove to be profitable, or that the investment recommendations or decisions Elevage makes in the future will be profitable or will equal the investment performance of the securities discussed herein.ELV-17-02