What Does "Retirement" Really Mean?

Don't automatically make the default decision of quitting work at 65. One of these alternative retirement options could make you and yours happier.

Aug 17, 2014 at 10:00AM


Source: Wikimedia Commons user Mjuzikxhankej.

What comes to mind when you think of retirement? The word has very different meanings to different people.

For some, "retirement" refers to life after we stop working altogether. But this isn't the only definition of "retirement" -- and it may not be the version that would make you the happiest.

Let's take a look at some alternative types of retirement to see which one you should be planning for.

The traditional definition
The most well-known concept of
retirement is the one that probably came to your mind first: You turn 62 or 65, quit your 9-to-5 job, and then while away the rest of your days playing golf, puttering around your garden, or finally taking those cruises you've always talked about.

The trouble with this scenario is that few people enjoy a life of complete leisure -- in fact, such a lifestyle makes some people downright miserable. Restlessness often sets in after a long stretch of relaxing and unstructured days.

When you leave the workforce, consider filling your days with meaningful "work" activities, like volunteering or writing that book you've always talked about. If you're a natural go-getter, you may even want to consider getting an enjoyable part-time job after you retire to keep yourself active and occupied.

Early retirement, a.k.a. "financial freedom"
If you're turned off by the idea of working for the vast majority of your adult life and waiting for an eventual payoff when you're older, you may want to consider retiring early -- or, as some personal finance gurus prefer to call it, "attaining financial freedom."

Early retirement operates on the same basic principles as traditional retirement: Work like crazy when you're younger, carefully save and invest your money to build a retirement fund, and then stop working altogether -- except the payoff comes much earlier, sometimes as early as your 30s or 40s.

How do you reach this lofty goal? Here are some starter ideas:

  • Live on one spouse's income and allocate the other's to saving and investments.
  • Take on a second job to build your savings.
  • Cut back on your standard of living so you require less income to live a happy, fulfilled life.
  • Invest in passive-income ventures (such as rental property or high-dividend index funds) to provide yourself with future revenue streams that require less hands-on daily work.
  • Start a side business for supplemental income. Save and invest the profits.

Permanent semi-retirement
Still not too keen on working like mad for a future payoff? Then you may want to consider semi-retirement, in which you continue to work enough to give your days structure and purpose while leaving yourself plenty of time for other activities.

You may decide to leave a high-paying career you don't enjoy and switch to a line of work that's lower-paying but more fulfilling -- one that feels like a hobby as much as a career. A combination of reducing your lifestyle costs and building up enough savings to back you up could make this doable for you at any age.

If you have a hobby that requires some skill or expertise (or you want to learn one), you may be able to leverage that to make some money on the side and even land regular gigs, such as trade and craft shows, lectures, consultations, and musical performances. You could even develop a side business that will pad your income with only a few days of work per week.

What does "retirement" mean to you?
There are lots of ways you can structure your work to get you closer to that golden state of work/life balance.

In the end, there's no right or wrong way to go about retirement. What works for one person may not work for another, so the key is deciding which arrangement will ultimately make you and your family the happiest -- both now and in the years to come. Only you know the answer to that question.

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A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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