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Encore
A blog about living in and planning for retirement

Stop Calling It “Retirement”

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Retirement. It’s the end point of the journey we’re all working towards, one day of employment at a time. The dictionary defines retirement as a “removal or withdrawal from service, office, or business,” and the standard view is that everyone saves and invests with the goal of someday reaching the point where they, too, can remove themselves from the working world and retire. There’s just one problem: an increasing number of people who are actually reaching retirement are discovering it’s not nearly as glamorous as once imagined.

The joy of not waking up for work every day gives way to a loss of purpose for getting up each morning. The freedom to do what you enjoy and travel when you want gives way to the reality that such activities cost money.  Even the opportunity to catch up on all those television shows and movies gives way to the realization that it only took six months to do it, and now you have to figure out what you’re going to do with the next 29.5 years.

In the financial planning world, we’re seeing a clear new trend in response to these challenges: when people reach the retirement end point, they don’t actually retire. And if they do, they often “un-retire” shortly thereafter. Granted, in almost every case, they do not simply continue the same job they’ve been doing all along. But they may change the job, and work part-time as an employee or consultant, working in/on the parts of the business they enjoy, and eliminating the rest. In other situations, they start a new business or career, something stimulating and new, which sometimes becomes a real success unto itself. Other times, a hobby turns into a small business that generates a lot of joy, even if it’s accompanied by little actual “profit” or income. In some scenarios, the new “job” is a volunteer position; in some cases, it ends up consuming even more time and energy than the individuals’ former paying job, yet still providing far more enjoyment and purpose.

In fact, the emerging trend of “not fully retiring” seems so strong, I wonder if it’s even time to stop calling it retirement. Perhaps a more accurate label is “financial independence” – having the  means to be independent of the need or obligation to work and generate income, so you have the freedom to do whatever you want with your time,  meaning, purpose, and enjoyment. And if a little income comes along with it, so much the better.

What do you think? Did you find yourself re-engaging with the business world or volunteer community after being retired for a while to help bring more meaning and purpose to your life? If you’re approaching retirement, are you still planning to go “cold turkey” and just stop work completely or are you thinking about easing into it?

Michael Kitces, CFP, is the director of research for Pinnacle Advisory Group, a private wealth management firm located in Columbia, Maryland that oversees approximately $850 million of client assets.  He is the publisher of the e-newsletter The Kitces Report and the blog Nerd’s Eye View through his website www.Kitces.com.  Kitces is also one of the 2010 recipients of the Financial Planning Association’s “Heart of Financial Planning” awards for his dedication to advancing the financial planning profession.  Follow Kitces on Twitter at @MichaelKitces.

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    • Sally,

      Retiring early has remarkably little effect on the size of your Social Security check. Here’s the analysis:

      http://www.retireearlyhomepage.com/soc_security.html

      For someone paying the maximum FICA, working until age 65 only gives you a 4% larger benefit (less than $100/month more) than someone who quits at age 60 and start collecting his benefit at 65 — hardly a reason to keep working and paying into FICA.

      John G

    • Sally,

      Retiring early has remarkably little effect on the size of your Social Security check. Here’s the analysis:

      http://www.retireearlyhomepage.com/soc_security.html

      For someone paying the maximum FICA, working until age 65 only gives you a 4% larger benefit less than $100/month more) than someone who quits at age 60 — hardly a reason to keep working.

      John G

    • I was born in 1966 so leading edge of GenX. I think of it more in terms of financial independence than retirement. Once I achieve that, if I want to work, fine, if not, I won’t. Really, having the choice is what I’m aiming for.

    • How does this lower pay affect future social securiy payments is my big questions. I want to get out of my current job a couple of years before turning 62, but more than likely will take a huge cut in pay which in turn will cause my ss to lower because of a lower average, if I understand. Am I correct?

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

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