Like many things, the quintessential vision of retirement—leaving the workforce for good, traveling the world, and moving closer to family—has evolved. Instead of ceremoniously leaving their careers, 73 percent of people intend to work while in retirement.
Some professionals don’t want to wait for traditional retirement and instead decide to embark on mid-career sabbaticals or mini retirements to prevent burnout. Simply put, retirement looks much different than it did decades ago.
To help you get a better idea of the retirement lifestyle that’s right for you, here’s a closer look at three forms of retirement that most individuals pursue.
Traditional Retirement
With a traditional retirement, you exit the workforce permanently. Whether you hit the road to create memories with your family or relax in a tropical destination, traditional retirement means no longer working for income. Depending on the health of your retirement accounts and accumulated assets, you can be in permanent vacation mode.
Benefits of a Traditional Retirement
Professionally, traditional retirement represents stepping back from your career. Personally, it may mark the start of you living your life to the fullest. Some of the key benefits of conventional retirement may include:
- Increased opportunity for travel
- Reduced work-related stress
- More time to spend with loved ones
- Ability to volunteer more often
- Freedom to do whatever you want, whenever you wish
Potential Drawbacks of a Traditional Retirement
Increasing healthcare, housing, and food costs—coupled with general uncertainty of the future—underscore one common worry among traditional retirees: running out of money. According to a Transamerica Center for Retirement Studies survey, 45 percent of workers age 50 and older fear outliving their savings, and only 62 percent are confident they can maintain a comfortable retirement lifestyle.
The abrupt lifestyle change traditional retirement brings can also lead to feelings of aimlessness, anxiety, and depression. Some people find they miss the structure and purpose their careers provided.
5 Tips for Navigating Traditional Retirement
You can counteract many of the drawbacks related to traditional retirement. Here are five ways to feel purposeful and engaged after leaving the workforce:
- Create a lifestyle plan based on your interests, and find opportunities to participate in the activities that bring you joy.
- Stay social by surrounding yourself with loved ones through places of worship, community centers, volunteer work, or social clubs.
- If you’re 50 or over at the end of the year, you can make annual catch-up contributions to help close your savings gap.
- Create a thoughtful withdrawal strategy to move from retirement accumulation to distribution.
- Work with a financial professional to avoid impulsive decisions based on sporadic market downturns.
Semi-Retirement
Longer lifespans, increasing healthcare costs, and the proliferation of remote work have forged a new post-career lifestyle called semi-retirement. In fact, it’s quickly becoming the go-to option, with the majority of employees preferring semi-retirement.
When you opt for this arrangement, you might leave your career around traditional retirement age but continue to work in some capacity. You might pursue part-time, scaled-back, remote, or flexible work that accommodates your schedule. For many, semi-retirement involves becoming a consultant, starting your own company, or pursuing a more meaningful career.
Benefits of a Semi-Retirement
Semi-retirement is an excellent way to remain active and involved while capitalizing on the expertise you’ve gained throughout your career. It can help reduce the stress of full-time work while offering the flexibility and autonomy to choose when and how much you want to work. Semi-retirement may even help you transition to full retirement when you’re more financially, emotionally, mentally, and physically prepared.
The semi-retirement lifestyle may provide functional and financial benefits such as:
- Enhanced ability to create your own schedule
- Reduced need to touch your retirement savings
- Opportunity to maximize your Social Security benefits
Potential Drawbacks of a Semi-Retirement
With the semi-retirement lifestyle, you still work, which may introduce stressors. You may have to go into an office, which curtails the freedom to work from anywhere.
Additionally, earning income while receiving retirement benefits may complicate your tax situation. Exceeding certain thresholds may make your Social Security benefits taxable.
5 Tips for a Successful Semi-Retirement
Semi-retirement can help you more easily strike a balance between increased leisure time and income. Here are five actions you can take to make your semi-retirement a success:
- Determine how you’ll cover health care.
- Explore opportunities in the gig economy.
- Consider the future transition to full retirement.
- Seek professional guidance and advice from tax advisors, financial planners, and career coaches.
- Proactively expand your professional network.
Mini Retirement
First popularized by the book The 4-Hour Workweek, a mini retirement is a temporary, voluntary break from full-time work that lasts anywhere from a few months to a few years.
You can use your mini retirement to step back from your career and travel, rest, pursue personal interests, or spend quality time with loved ones. Afterward, you return to the workforce. Like a sabbatical, you can take mini retirements periodically throughout your career instead of waiting until you permanently leave the workforce.
Benefits of a Mini Retirement
Mini retirements have fewer age norms or requirements and can be more realistic than retiring early. A mini retirement can be a path for you to pursue a passion, gain meaningful experiences, or spend more time with loved ones. Testing the retirement waters with a mini retirement can help you plan your future and assess your financial readiness through experience.
Potential Drawbacks of a Mini Retirement
Many people who embark on a mini retirement prepare by aggressively saving, reducing expenses, and generating alternative income streams. You may need a health insurance alternative and should consider how a mini retirement might impact your retirement savings and Social Security benefits. Also, some people find reentering the workforce challenging after a mini retirement.
5 Tips for Pursuing a Mini Retirement
A mini retirement requires careful consideration and preparation to make sure you can enjoy the time away. Here are five ways you can set yourself up for success:
- Plan and budget ahead of your mini retirement. Review your health insurance options, too.
- Reduce your expenses and pay down debt as much as possible.
- Negotiate a sabbatical with your employer.
- Create passive income for extra financial support during your mini retirement.
- Keep your skills sharp while away, and plan for reintegration into the workforce.
Bankers Life Can Help You Take the Next Step
Your vision of retirement is unique. Accordingly, it’s essential to have a personalized plan to achieve your retirement lifestyle goals. Reach out to a Bankers Life representative for help reviewing your situation and goals.
Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.