How to Retire Well and Enjoy Your Time
We will all retire one day whether by choice (early retirement), by age, by circumstance or by a physical condition. Retirement is simply a period when you’re no longer actively working to pay for living expenses.
Thinking about retirement is fundamental in creating a more secure and lower stress financial future.
But it never seems like there’s a perfect time to talk about retirement. Whether we’ve just started our first job or we’ve worked for the past 30 years, retiring from work will happen. And it’s important we think about how to fund that period of life.
Retirement is when your time is mostly spent on leisure activities. And a time when you’re mostly spending and not accumulating money from work activities.
What is retirement?
Retirement is defined as a “withdraw from one’s position or occupation or from active working life.” In fact, retirement didn’t exist until roughly one hundred years ago. As we understand retirement today, it was solidified as a retirement age when government benefits were made available to seniors.
Many people define retirement as the period where they get to spend their time however they want. Some picture themselves sitting on a beach while others may find themselves traveling and spending more time with family and friends.
You can choose to retire when you’ve achieved financial independence or have enough sources of income to cover your living expenses. When you have enough assets or passive income streams, you can choose to withdraw from traditional work and use your time as you see fit.
Four Types of Retirement
1. Traditional Retirement
This type of retirement is what most people understand. You work for 40-50 years and retire when you’ve reached the full retirement age set by Social Security Administration to receive benefits. Even though you may have enough money to retire before the full retirement date you continue to work until those SS benefits are available.
2. Early (Independent) retirement
If you retire before the “full retirement age” set by Social Security, then you’re retiring early. Others define early retirement as having enough savings or investments that generate income to cover living expenses. This enables them to retire from their jobs to explore new opportunities way before the defined retirement age set by the Social Security Administration.
3. Part-time (Working) Retirement
When you choose to continue working, then you can call yourself semi-retired. You can either choose to work to give yourself a sense of purpose or work to supplement your income.
4. Mini Retirements (Sabbaticals)
You can choose to work for a period of years then “retire” for 1-2 years before rejoining the workforce. The idea is to work for a period of years and saving your income (and investing to grow income) so you can take a mini-retirement or what some professions refer to as a sabbatical. During this mini-retirement, you’ll have financial resources to cover your living expenses.
How to Achieve Retirement
To achieve retirement, you’ll need a plan. Whether you desire to retire early or work until full retirement age, you’ll need to manage your money in a way that sets up a comfortable retirement.
The key to retiring well is to start saving when you start earning income. The sooner you start the more time you give your money to grow and take advantage of compound interest through savings and compound growth through investing.
Additionally, what keeps many people from saving and investing for retirement is due to lifestyle creep or lifestyle inflation-as income grows so does the cost of one’s lifestyle. This creates a scenario where there’s never enough extra money to save or invest.
Keep in mind, the amount of money you need to retire well (however you may define well to be) is a matter of your lifestyle. You’ll need to save or generate enough income to cover the cost of your lifestyle. The lower the cost of your lifestyle the smaller the amount of money you need.
For some retirement means downsizing. It doesn’t necessarily have to be about limiting your life, it’s about actively creating the ideal retirement life while you’re still in the working stage.
Don’t Retire, but Rewire
You’re never too young to plan and invest for retirement. In fact, starting as early as possible can afford you the opportunity to choose when to retire as opposed to waiting for the full retirement age set by a government agency.
I encourage you to start thinking about what retirement means to you? Create a life plan for your retirement years. This will help you set goals and a plan to achieve them.
It’s not just about the financial plan. You’ll need a life plan because when you regain back all the time you used to spend working, boredom may set in and you’ll find yourself with too much time.
As your working towards retirement, its important to discover the elements of your lifestyle you enjoy. And discover your interests and projects you’d like to work on. You don’t have to wait until retirement to find those out. In fact, it’s imperative you live a semblance of the life you want in retirement today.
Doing so will help you identify how you’ll spend your time and how much money you’ll actually need to live it. Sooner or later.
Choose a routine
Retirement offers flexibility but for many that freedom can create stress. After years of adhering to a work routine, it can be difficult to find daily meaning in life without some sort of daily activity. As you prepare for retirement, start thinking about how you’d spend your days and integrate them into your current lifestyle.
Remain socially connected
Continue to foster relationships with people you enjoy, trust, and share common interests. It’s important to remain connected with others. And equally important to meet new people who can usher enjoyable moments and deep meaning connections.
Retiring well includes having a healthy mind. It’s important to challenge your brain with activities to remain sharp. When you’re no longer working, your less likely to encounter situations that require learning something new or meeting new people. You’ll need to be proactive in retirement to keep your mind growing.
Retirement is about having time for more preferred experiences. It can be easy to retire and sit at home and spend time binge-watching. You’ll need to put yourself out there to gain new experiences. Whether you decide to volunteer, attend local events, or travel. Prioritize gaining experiences and creating new memories.
Financial Aspects of Retirement
Think about your Income, not just Assets or Investments
There’s a lot of emphasis on growing assets and sizes of investment accounts. Much of the assets and investments may not be accessible to help cover the cost of your lifestyle. Assets and investments would need to sell for cash to pay for living expenses.
To retire well, think about your income.
How are you generating income? What are your income sources? Are you dependent on one income stream? Can your assets be sold for cash?
Learn more: Why You Need Multiple Income Sources
Spend your savings mindfully
If you’ve saved enough money to cover your lifestyle, you’ll need a spending plan to ensure you actually use the money you’ve saved and grown. There are some retirees who stress about spending money when financially they could afford to splurge.
It’s important to continue to use a budget to allocate your money so it doesn’t stress you if you’re spending a few wants and luxuries.
Learn more: Spend Mindfully
Have your retirement plan
- We’re all aware of retirement plans offered by employers such as the 401(k) plan or pensions. Get to know your employer plans, participate and max out your contributions.
- Contribute to tax-advantaged plans such as your employer’s 401(k) or invest in a Traditional Individual Retirement Account. Consider Roth IRAs for after-tax contributions.
- Participate in stock benefit plans offered by your publicly-traded company. Ask your HR manager about stock options, restricted stock units, employer stock purchase programs or employer stock ownership plans.
- Review your social security benefits to determine how much you’ll receive when you’ve reached full retirement age.
- Invest in taxable brokerage accounts to purchase stocks, ETFs or other securities for long-term growth to support retirement lifestyle.
- Consider annuities and insurance products.