In your retirement fantasy, do you finally tell the boss what you really think on Friday and slink into a lawn chair with your fishing pole in hand by Monday?
In reality, older workers haven't been hanging up their full-time jobs and immediately replacing them with full-time leisure. A recent study by Vanguard showed that many people make a more gradual transition from work to retirement, some by hanging out for a while in a state of semiemployment.
Take a look at the six different transitions into retirement that the study uncovered among people age 55 to 69:
- Early retirees. These folks, 29% of those surveyed, leave work in their 50s and never look back. Financial preparedness proved the key. People were most likely to be in this category if they had more than one of the following: a pension, a defined contribution plan that paid out in a lump sum, a high savings balance, or strong savings habits.
- Work and play. A smaller number, 12%, left full-time work in their 50s but then took on part-time jobs or became self-employed. They enjoy the perks of work, but they don't necessarily need the money. They're making a gradual transition from work to leisure.
- Still working. This category, 35% of those surveyed, may be the closest thing to the traditional retiree. They continue working full-time into their 60s and then often take on part-time work or self-employment into their late 60s. Unlike the first two categories, they're worried about their financial resources and may not have a pension or 401(k) account.
- Returnees. This group, only about 5%, flew the coop but then turned around and came right back. Financial concerns drive them back to employment. They often had a pension but did not save much themselves.
- Spouses. Typically women, 9% of those surveyed had lower participation in the workforce overall and had a hard time categorizing themselves as working, retired, semiretired, or something else.
- Still working. About 10% of people just kept working right through their 60s and report that they never plan to retire. An overwhelming number have a desire to remain active, but nearly 58% said they had to keep working to meet basic living expenses, especially health insurance.
This list can tell you two things. First, and it's probably pretty obvious to you, your financial preparations may determine which category you fall into, whether or not it's the one you might choose for yourself.
If you have a strong pension, a healthy 401(k), and good saving habits, you maximize the chance that you'll be among those who can decide one day that they've had enough sales presentations or cranky customers to last a lifetime. Your odds of being able to just trade work for leisure go up.
If your work benefits or your savings habits have suffered over the years, or you find yourself divorced or widowed before retirement, you're more likely to find yourself in one of the other categories, either returning to a job or making a gradual transition from work to retirement.
This list can also tell you a second thing. If you know which category you'd like to be in, you can map your retirement savings path to meet that goal. If you want to end your working days in your 50s, ramp up that savings immediately. If you know you want to work forever, save enough so that it's a choice and not a necessity.
Get more information to help you plan at the Retirement Center. You'll learn that one of the five things you must know about retirement is that it's never too early or too late to start.
You can also learn much more by taking the Rule Your Retirement newsletter for a free 30-day spin. Advisor Robert Brokamp has all the info to help you prepare for a happy retirement, whether your career is just starting out or you're counting the days until you leave the workforce forever.