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 topics that will educate, benefit, and help improve your financial life. Ultimately, to help you focus on your telos!
I talk with a lot of people about financial planning, goals, and the like. That probably goes without saying. I get all sorts of different questions, some really complex, some are simple. I was recently talking with some folks about retirement, as I usually do and the question that came up was, what really is retirement?
It’s a really interesting topic when you start delving in and understanding that retirement means different things to different people. Maybe it means completely leaving the workforce, maybe it means working part time, or maybe it means switching careers. It is completely normal to have different types of retirement.
Timing on retirement can vary between individuals as well. For some, the timing is due to necessity. Many people during the 2008 recession had to modify their retirement plans. Maybe it meant they couldn’t stop working at 65 like they planned. Maybe it meant they had to work part time. Maybe it meant they had to reduce their lifestyle and couldn’t travel or buy their vacation home or achieve some other aspect of their retirement they had planned.
Why should you care? Considering different retirement plans and different financial goals, gives you more options. Maybe you don’t need options, but maybe you’ll really like one of the ideas. Here are a few different types of retirement. . .
I’m going to talk about this in two pieces, since it’s a big topic to cover. In this blog, I’ll discuss the classic retirement styles and I’ll cover a few more modern alternatives in the next blog so stay tuned! I’ll make sure to link them so you can quickly check them both out.
Traditional Retirement. The OG. What we all think of when we think of retirement. You work full time. Do the grind. Then, one day stop. This was largely created by companies providing pensions in the past and required people to work for several decades to have their income benefits grow and mature to provide them with a pension or similar income that allowed them to stop working. Some benefits to this type of retirement are social security will be more vested, though for those of us born after 1963, it fully vests at age 67. It gives you a long time for a career to build a savings account to take income from in retirement. Having a long, continual work period is easier for your career and advancement. Some downsides to this are you might not make it to retirement. Arelatively small percentage of us will die before reaching this goal. Another percentage will die shortly after, having never really had a chance to enjoy their retirement. Another problem is adjusting to retirement lifestyle.
Many of us allow our job or career to become our life and we don’t know how to transition, especially after spending decades with work as a key feature of your life. How does one simply stop that? There’s no easy answer and, just like everything else with financial planning, it’s unique to every person. Some transition very easily, some find that work was a huge part of their identity, lifestyle, self worth, social network, and culture and they don’t know how to live without it. There’s nothing wrong with that, the point is you need to be aware and prepared to know that retirement might isn’t all it’s cracked up to be for everyone. You need to think about how your career affects you and what it means to you. Small business owners are a great example of this, they tend to become intertwined with their business and can’t imagine not working.
I should stop here to say this can be a problem with any “kind” of retirement. You may never be ready to retire. You may always want to work. That’s okay. There’s nothing wrong with it. Let’s make a plan for that.
Early Retirement. For the aggressive saver. Or frugally inclined. Or benefactor of a windfall. Basically, this is retiring before traditional retirement age, historically 65, but is increasing as life expectancies increase. Maybe you would retire at age 55 as an example. This is an attractive retirement for those who don’t like their job. Or have a hobby that they want to pursue. Or are afraid of early mortality. Or sundry other things that might motivate one to want to retire early. The benefits here are you have more time to yourself to pursue endeavors you always wanted to. It is also more likely you’ll be healthier and more active longer in retirement, so you would be able to do more of the active lifestyle things you like.
One of the main downsides is there is more financial risk involved. If you’re retiring early, where will your money come from? Investments? Pension? Annuity? If you are counting on some type of financial vehicle to fund your retirement, you need to be more conscious of managing assets over a long period. Maybe the investment strategy is the same, maybe not, either way, because there is more time, it will need more care.
Listen, 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 goals. Maybe you’ll never retire, but it should be your choice. With proper planning, strategy, and execution you can better pursue 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 Young Professionals. 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.