All of us dream about early retirement. However, before we can spend time planning an early retirement, we should get our thinking clear about the broader subject, which is simply retirement.
Just to be clear, we are talking about voluntary retirement. Forced retirement, due to illness, injury or economic woes is not part of this discussion.
Retirement is a modern phenomenon
Although Roman soldiers received pensions as far back as 10 B.C., the idea of retirement is a recent one. It started in Germany towards the end of the 19th century and only began to get traction early in the 20th century.
Before that, most people worked until death or as long as they were physically able to, because there was no old age support other than the extended family. Sadly, this remains a reality for millions of people in poor and fragile countries.
So what is retirement?
The formal view of retirement is the termination of active, income-generating work. Alternatively, leaving the workforce.
Legislation and pension fund rules have a significant impact on the retirement age. Although it varies widely from country to country, it is generally between 50 and 70.
Traditional thinking of the silent generation
The silent generation, those who were born before 1946, had a black and white view of retirement. They saw it as a life-changing event that will happen on a specified date, usually a birthday or job anniversary. A day on which you clear your desk and say goodbye to colleagues and friends. The start of a slower lifestyle, with comfy slippers and a small garden to groom.
Their retirement thinking influenced many of their important life and lifestyle decisions. Very often, personal happiness played second fiddle. Typically, the older generations would have held onto a job at all cost, in order to accumulate maximum contributions from the employer.
That was the old thinking: finish school, go to university if you can, get a job, keep that job, retire. And that can be called traditional retirement.
Then came the baby boomers
Assuming most people would start formal employment at around 20 years of age, baby boomers would have entered the workforce from 1966 onwards.
Economies around the globe looked differently then and baby boomers were starting to think differently about retirement. Their thinking became less rigid, partly because they had more opportunities, but also because their generation could create wealth at an unprecedented rate. Bureaucratic structures and their ability to support the populace improved as well.
The older baby boomers came up with the concept of semi-retirement. Although there are many definitions, it is essentially withdrawing from employment but still working occasionally or part-time. The result is an improved balance between life and work.
People choose semi-retirement for one or both of the following reasons:
- They need to supplement their retirement income;
- They want to remain active because of the physical benefit or mental stimulation it provides.
Through the years, due to bad planning or economic woes, some had to un-retire. That is, going back into formal employment with the purpose of earning an income and bolstering retirement savings. To become un-retired is generally not voluntary.
Another concept positioned somewhere between employment and retirement is referred to as pre-retirement. In this state, an individual would continue to create economic wealth or generate knowledge by research, likely on a part-time basis. This is often without remuneration.
Generation X added spice
In order to appreciate the value that Gen X added to retirement thinking, it is worthwhile looking at a description of the demographic, courtesy of The Balance Careers:
“Generation X is independent, resourceful, and self-sufficient. They value freedom and responsibility in the workplace. Many in this generation display a casual disdain for authority and structured work hours. They dislike being micro-managed and embrace a hands-off management philosophy.”
It is, therefore, no surprise that they introduced temporary retirement to the world. It represents a break in formal employment, with the premise of joining the formal workforce at a future date.
The time spent in temporary retirement is specific to each individual. Some use it simply as a break from the rat race to charge their mental batteries, while others use it for specific projects such as studying full-time, writing a book or travelling.
A few years into the 21st century, Tim Ferriss explored mini-retirements as another form of break from formal employment. These would be multiple, short breaks as opposed to a single, longer break as contemplated in temporary retirement.
Some would argue that mini-retirements are not truly a form of retirement. That it is simply a series of sabbaticals instead. Others would counter-argue that any form of voluntary break from formal employment, is retirement.
One thing is for sure: Gen X has cemented the fact that financial independence creates options.
Will the millennials have it all?
Millennials have started to enter the workforce in the so-called gig economy. Freelance work and short-term contracts are no longer the privilege of a select few. It is commonplace and almost socially fashionable. Virtual jobs, working from home or digital contractors are all concepts that will give this generation freedom of choice, and freedom of movement.
The other side of this coin is the added pressure to remain financially disciplined. The increased freedom of choice can easily overshadow the need for prudent wealth management. After all, the increased retirement options remain subject to financial independence.
Make retirement part of everyday life
Regardless of our age or generation identity, retirement should become part of our daily life. We should not see it as a future event, but rather as an integral part of our lifestyle.
If we consider how everyday decisions could affect our retirement goals, we will probably start to do things differently. Retirement will then become part of our life goals and contribute to our desired work-life balance.
“Retired? Hell no, that’s for old people. I just stopped the commute, ditched the suit and learnt to keep myself busy with stuff I like” – Travel Hippi
I would love to have your thoughts on retirement and the way it is changing. If you found it useful, please do not forget to share it with a friend.