Retirement can be defined as withdrawal from formal employment or active work life, which is determined by how financially independent one is. In the late 1800s, retirement was not considered desirable since it meant letting a person off work because they were old and no longer productive.
The big corporations pushed for a younger workforce. In today’s economy, retirement means freedom and limitless possibilities to do more with your life. Below are the eight most popular types of retirement lifestyles:
1. Traditional Retirement
During the 20th century, in developed countries, the standard model of work was prevalent. You secured a job, worked for a few decades before retiring around the age of 60 to enjoy the remaining part of your life. Your retirement was funded by the company’s pension programme, personal savings and government aid. You will most likely move into a suitable retirement home and enjoy the rest of your days.
2. Early Retirement
In the 1970s and 80s, the standards of living had changed so much that people began to question traditional assumptions of employment. They started embracing the idea of leaving the workplace before attaining what was considered the “retirement age.” The big question was: “why wait until the end of your days to enjoy life”? There had to be a better way, they reasoned.
The better way turned out to be early retirement. The brave pioneers worked hard to increase their income while striving to keep their costs down. This made it possible to save enough to stop working at 50 or even 40 years. This model requires one to save 50% of their income or more. If you’re the diligent type, this model enables your wealth to snowball. You eventually reach a “”crossover point”” where your investment can support your spending. This is called financial independence.
3. Temporary Retirement
These types of retirement means working for 10 or 15 years, then, as long as your money lasts, taking time off to pursue your passions. You can then go back to work if you want. This kind of arrangement gives you time to spend your prime time on what is important to you. Returning to work later in life enables you to access higher pay and probably better health insurance.
This model is all about finding a work-life balance. For some people, it means continuing with their previous career but in some sort of reduced capacity. For others, it could mean changing jobs to do something that pays less but offers a sense of satisfaction. For others, it could simply mean supplementing investment income with a carefree job at the local coffee shop or fabric store.
The significant advantage for these types of retirement is you can leave the rat-race at a much earlier age than you would otherwise be able to. If you’re not ready to stop working entirely, you can find less stressful and more fulfilling work.
5. Mini Retirements
This model takes the 20-30 year retirement and distributes it throughout your life instead of saving it to the end. You work in fits and starts. You may work for 5 years, take 2 years off, and repeat the process all over again. The breaks are referred to as mini-retirements, but they are commonly known as sabbaticals. The advantage of this model is that you can get the best of both worlds: work and retirement.
For these types of retirement, the disadvantage is you’re not able to build buffer savings because you’re using that money to fund your sabbaticals every few years. Mini-retirements is a terrific option for people who want to take time off to do business or travel, or pursue a non-traditional career path while still young.
6. Disability Retirement
This type of retirement is accorded to employees who, due to sickness or injury, acquire a disability. In this case, the person with a disability is not able to effectively perform their duties.
The employer opts to pay them off and relieve them of their obligations. If the employee is not fully incapacitated and can perform other tasks, they are paid off and reassigned to other duties to keep their income flowing in.
7. Voluntary Retirement
In some cases, an employee just decides to retire on their own volition before attaining the retirement age. They do this to pursue other interests, such as entrepreneurship, or to pursue further education in preparation for a total career shift. In voluntary retirement, an employee chooses when and in what circumstances to retire. The beauty of this is that one can plan for voluntary retirement.
8. Deferred Retirement
In this scenario, an employee who would otherwise be eligible to retire and start drawing benefits from an employer-defined plan keeps working instead. Rather than have those additional years of service included in future benefit calculations, the employer places a lump sum into a separate account for each year worked. The account earns interest as long as you’re working. When you eventually retire, this money is paid out to you, together with your pension.
This model is preferred by employers for employees who perform functions that are critical to a business. It could also be applied where succession planning is yet to be put in place.