The concept of retirement is a relatively new idea in terms of human history. The idea really started gaining popularity as life expectancies began to increase. As people lived longer and somewhat healthier, they eventually got to the point where they no longer had perceived value in the work place and would be forcibly replaced for younger blood. This eventually lead to the first old age social insurance programs being created in Germany back in the 1880’s. The caveat at the time was that the payments would not kick in until the individual turned 70 years old and life expectancy was only 45 in the region at the time. But as time went on and medicine improved people began to live longer and healthier and ultimately the idea of retirement became more about leisure than it was about being less useful for employment.
Naturally, as people started to enjoy retirement then they ultimately wanted to experience more of it. This is ultimately what has lead us to the modern idea of what retirement should be which gained popularity over the last 100-150 years.
Rarely does someone ever question this traditional model of retirement and the goals people have long term. Simply put we are born, we train to get meaningful employment, we work until we no longer have to and then we stop for the rest of our lives. This has become the primary objective for most people in their life time. I wonder however, if people considered a different option would it make them happier? How about for people that get to retirement and realize that they don’t necessarily enjoy it?
Something we are seeing more commonly today is the idea of semi-retirement where you maintain some employment later into your life. This has become very popular with business owners and entrepreneurs over the last few decades.
Going this route can have incredible ramifications for the amount of savings which is needed to retire. According to Michael Kitces in his blog post, for every $10,000 of annual income, if you semi-retire at age 55, means you can save $250,000 less in total portfolio value assuming a drawdown rate of 4% per year in your portfolio. Essentially what this means is that if you planned to live on $40,000 per year with no working income you would need to have $1,000,000 in your portfolio by age 55. If however, you plan to earn $20,000 per year working part time, the amount of retirement money you need is cut in half to just $500,000.
Here is a newer concept of retirement which very few people consider right now. What about temporary retirements or sabbaticals throughout your lifetime?
In this concept you are no longer shooting for this life long goal of retiring one day but instead you are effectively experiencing your retirement throughout your lifetime. Consider the opportunities you might have for experiences if you are taking advantage of this time while you are younger instead of pushing everything off until later in life? How about the changes you could experience in your career? How about the time you could spend with your family while they are around? This is certainly not for everyone and not for every career path but you can imagine the possibilities for someone who might be more inclined to this type of lifestyle.
I think it’s important that we continually challenge the status quo of retirement and what it can look like. There is no one size fits all goal for everyone and so we should stop treating retirement as if it has to be done only in a certain way. The real key to choosing your retirement path is starting early as the choices you make could have big ramifications on what you need to do to accomplish your goals.
But, the sky is ultimately the limit. This is your retirement, make sure it’s everything you want it to be.
-Grant White, CIM®, CFP®
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.