While nearly everyone in the industrialized world is practically fixated on the importance of a comfortable retirement, reality may be heading in a very different direction. Semi-retirement may be the new normal in retirement planning. A report from US News (via Yahoo! Finance) entitled Why the Middle-Aged Are Missing Out on New Jobs, highlights the reasons why full retirement is getting harder to achieve for so many people.
“Numerous surveys show that perhaps half of all Americans heading toward their retirement years lack enough savings to maintain their current standard of living as they age… Add to that fears of cutbacks in Social Security and Medicare, due to the skyrocketing national debt. The golden years, for many, aren’t shimmery at all… Many seniors say they plan to postpone retirement or work indefinitely, and the data shows they’re doing just that… rising later-life employment is probably a sign of economic stress that could last awhile.”On the surface, the article is dealing with the absence of jobs for the middle aged. But the reason it spends so much time discussing the retirement prospects of the elderly may be the more significant story. Apparently the reason middle aged workers can’t get jobs is because the elderly are working longer to delay or forgo retirement and reducing the number of jobs available to middle aged workers. That in and of itself means that fewer current middle aged workers will have the financial resources to retire when their turn comes—a vicious circle with no end in sight.
If you’ve spent much time on this website in the past, you know that this is a topic I’ve written on numerous times. It’s the “B side” of the retirement discussion—the side that gets little coverage—and stands in stark contrast to far more typical analyses that are dominated by convincing projections on how a few thousand dollars invested each year will make you a millionaire living a life of luxury by the time you’re 65.
I don’t think the majority of people will have that kind of retirement. But that doesn’t mean that the situation is all grim or that some form of retirement won’t be available to most people. Most of us, I suspect, will settle into a life of semi-retirement. If you think that will some kind of failure, read on…
The Good News on Semi-Retirement
At first glance, the trend toward semi-retirement seems like gloom-and-doom fodder. And while it’s true that the trend is being driven by negative factors, such as back-to-back stock market crashes, a major drop in real estate values and the absence of back-in-the-good-old-days defined benefit pension plans, semi-retirement actually holds a number of advantages over the full blown version. In fact, I prefer to think of it as a positive response to a negative set of circumstances.
No need to wait until you’re 65. Most people have to wait until they’re 65 (or older) in order to fully retire because it will take them most of their working lives to be able to accumulate sufficient money to afford it. But if you semi-retire, you can actually do it anytime you’re ready. Semi-retirement becomes a lifestyle, while full retirement is a far off event on the calendar.
Having more free time when you’re young enough to enjoy it. It’s common for people to envision a perfect retirement when they’ll finally be able to enjoy all of the activities and adventures they never had time for during their working years. But sadly, that retirement often occurs at the same time that debilitating health conditions set in, limiting options.
Maintaining good health becomes a priority. Would you take better care of yourself if you knew you’d be working right up until the very end of your life? Probably. Unfortunately, health concerns often take a back seat to financial plans. It’s almost a self-fulfilling prophecy that we neglect our health in order to focus on saving up enough money for the time when we might not have our health. The very effort itself takes a toll on the body. If you semi retired in say, five years, instead of waiting for full retirement at 65, you’d have more time in the intervening years to maintain and improve your health. That might make the “golden years” a little more golden than having a few extra bucks in your 401K.
Enforces a lower cost lifestyle. Retirement planning is hyper-focused on the accumulation of money. In fact it often seems that retirement itself is determined entirely the size of one’s bankroll. But what about living expenses—the almost unmentioned critical other half of the retirement equation? The size of the bankroll needed for retirement will fall in direct proportion the level of your cost of living. Once you lower that, many things become possible.
Greater certainty. The farther out our plans, the less certain they become. A semi-retirement planned for five years out will be more certain than a full retirement set 30 years into the future.
A stronger connection to the world. Few of us realize the degree to which work connects us to the world. It’s usually only post-retirement that anyone figures that out. It’s ironic that the thing we’re working to break away from through retirement is the very one that gives us much of our relevancy in life.
Creates a lifelong time horizon. 65 has become one of those life’s barriers ages—once you cross it, life is never the same. There’s life before 65 and life after it. Of course, it’s all an illusion. Apart from the fact that you’ll stop working at that age, most other aspects of life will remain the same. If you’re semi-retired, there is no such barrier age. You won’t be 40 and thinking about the next 25 years, you’ll be properly thinking of the rest of your life, which could be another 40 or 50 years. That kind of time horizon could change your outlook on a lot of things.
Forces us to find our life’s calling. If there were no retirement, no end to the work you’re doing, what work would you choose? If you’re waiting for retirement to relieve your work burden, this question may not be relevant to you. But if you plan to work for the rest of your life, finding and pursuing that career, business or job that you were “born to do” would become one of the most critical missions in your life. In fact, if you’re doing work you really love, retirement won’t even be necessary. Semi-retirement would force you to do this.
Making Semi-Retirement a Reality
So if we want to semi-retire sooner, rather than waiting for 65 or some other age when we’re financially ready for the full version, what should we do to prepare for it?
Find your life’s calling—you’ll be following it all your life
Make saving money a habit, rather than a specific portfolio size
Learn to live beneath your means—even to live at any income level
Let go of toys, they cost money and create debt
Take better care of your health—you’ll need it longer than you think
Begin thinking of your life in terms of the rest of your life, not about “until 65 and then…”
Learn to enjoy life now, even at least a little bit each day
If you don’t think you can afford to semi-retire, check out this post about a man named John. A young man, he already has what most of us are working feverishly to achieve much later in life. John isn’t semi-retired, not yet, but he’s in a position to do so. Any of us can—and it has far less to do with money than we think.
Also, if you’re interested in developing additional income streams, either for retirement or to help prepare for it and fund it, check out my post on freelance blog writing. It’s the kind of work and business you can easily run well past retirement age.
What do you think about the prospect of semi-retirement vs. full retirement? Do you think it has advantages? What else can we do to prepare for it?