Thanks for coming back for the latest edition of Planning for your Purpose; Telos Financial’s blog where I discuss different topics related to financial planning. Dennis LaVoy, CFP®, CLU® is Plymouth, Michigan’s CERTIFIED FINANCIAL PLANNER™ Professional serving clients throughout southeast Michigan as well as across the country.
The purpose of the blog is to introduce financial planning concepts and questions I receive from clients that I believe are important. I want to start discussions about financial subjects that will educate, benefit, and improve your financial life. Ultimately, to help you focus on your telos!
This is the second piece talking about types of retirement. I think most people think of retirement as traditionally defined – working until age 65 or so, then stopping working to enjoy life. As I mentioned in the previous piece, sometimes retirement decisions are out of necessity, sometimes out of choice; retirement has been changing over time and we have, what some call, the new retirement.
Part of my job as a financial planner is to help families explore and develop their goals to create realistic and attainable targets. In this case, I’m attempting to provide information and some education that might help make a better life for those making a plan. Remember, these are not the only options, they are meant to inspire you to create a life you love.
All of that said, here are a few other retirement styles that you might find attractive.
Partial Retirement. Or partial working. There are different ways this can be done, but one example would be working to age 65, realizing you don’t have enough saved to retire, so getting a part time job to supplement your income and make it possible to stop your full time workload. This can also be stopping a job you don’t love that pays well to pursue a passion. I know a lot of retirees who retired from their career and work at a golf course to fill some time, create some required social activity, and of course, free golf. I’ve known retirees who went to work doing prep in a restaurant because they were passionate about cooking and wanted to learn.
The biggest benefit to this is it provides a dramatic amount of additional security to your retirement. If you are one who expects to have a hard time transitioning, this can be key. If your retirement savings are close to enough, but maybe not quite, this can push you over the edge to make it work. If you crave continued forced social interactions, this can be the solution. Some downsides to this are it is dependent on you remaining healthy enough to do the activity you want. If you get sick or injured, it can upset the plan. Another downside is it’s dependent on the jobs being there. If you happen to retire when a recession comes, it could be really tough to find a desirable position.
Staged Retirement. This is similar to partial retirement, in that you continue working to some degree, but it is typically going to be more structured. The biggest difference in my mind is it’s more structured. As an example, let’s say you worked a full time, high paying job you don’t like for 15 years starting at age 22. You aggressively save during this period because you have a great income. After that, you go to another full time job, that doesn’t pay as much, but it is enough to support your lifestyle and you really like the work for 15 years, or ages 37 to 52. After that, you go part time or become partially retired for 15 years to age 67 or your standard social security full retirement age. As with the other retirement types, there are an infinite amount of ways to structure this.
This structure also assumes there is a job you really enjoy and that you have the skills and knowledge to do it or that you’re able to obtain the skills and knowledge later in life.
The biggest benefit to this strategy in my mind is, you are able to have an “ideal” quality of life, however you define that for a longer period. Yes, you’re still working, but in a career you (theoretically) enjoy more. Again, each of these strategies is specific to the individual, so you have to decide if it is right for you.
There are many risks to this strategy. One is that you assume the savings you have from your highest earning years will grow enough to provide you income in retirement. If it doesn’t, it might not be possible to go back and earn enough, so you might be forced to work longer than planned or to compromise on quality of life.
Staggered Retirement. This is a strategy I’ve particularly observed with the younger generations that I’ve worked with. This is working a job then taking a break for a period before going back and cycling that over and over. As an example, maybe you work for three years, then six months off to travel, spend time with family, pursue a passion, or something else. You continue this cycle over and over until a full, more traditional retirement. Maybe you even continue it longer, because you have the built in breaks.
The benefit to this is you are able to enjoy your life and have more “you” time throughout life, while you’re younger particularly. With this strategy, maybe you plan to work until age 75 because you have had 10 years of “retirement” throughout your career. It could help prevent burnout in your career. There are many risks and downsides of course. It could be harder to stay current in your field if your breaks were too long. It could be difficult to find an employer that would facilitate this lifestyle. You might need to compromise more, maybe you’d be able to take three months every two years or some other reduced period.
As I said in the previous piece, there’s no right answer for what the “right” retirement looks like. I founded my company to help families and individuals achieve their goals. The point is to learn what you want. Dream your dreams then live them. Whatever that means to you, Telos Financial is here to help you create a plan to help achieve your financial goals. With proper planning, strategy, and execution you can live your dreams.
Want to talk more about financial planning? Call 734-468-3050 today for a free consultation or email firstname.lastname@example.org to schedule a free appointment to talk it through.
Telos Financial is Plymouth, Michigan’s financial advisor for those in their working years. That includes Millennials, Xennials, Generation Xers, & anyone who is still saving for retirement. Telos is a fee based, holistic financial planning firm located in Plymouth, Michigan founded to help young professionals and families. CERTIFIED FINANCIAL PLANNER™ Professional Dennis LaVoy, CFP®, CLU® founded Telos Financial and uses his experience & knowledge to help families and individuals in Plymouth, Ann Arbor, Detroit, and across the country achieve their financial objectives.
The views expressed are my own opinions and do not apply to every situation. Your situation may vary so make sure to consult a professional for advice prior to making any decisions.