Retirement can be categorized by stages. Sociologist Robert S. Weiss looked through a prism of 100 retirees in the Boston area and identified three classifications and their limitations. These approaches may overlap or conflict, and they can be both subjective and objective.
- Economic — this is helpful but may miss early retirees or older people willing but unable to find work.
- Psychological — if you think you are retired, you are. But what about second-act careers?
- Sociological — how others see you.
Financial independence
The financial framework assumes retirees can count on their accumulated savings and investments, along with pensions and federal benefits, rather than rely on a salary or paycheck. In 2023, the Federal Reserve’s “Report on the Economic Well-Being of U.S. Households in 2022 – May 2023” found that 31% of non-retirees considered their retirement savings plan on track. That was down from 40% in 2021, when 27% of adults regarded themselves as retired.
Social Security in particular has shaped a general view of the retirement age since it allows some people to stop working. Considering that, in 2022, the average Social Security benefit amounted to $1,542 per month, the program is unlikely to cover all expenses, especially medical or long-term care. It should be noted, however, that before Social Security was enacted in 1935, many people continued to work their entire lives, or at least expected their families to provide for them.
When pre-retirees assess their financial readiness for retirement, they typically construct a balance sheet showing their expected income and expenses. It is still always a crapshoot. It is exceptionally difficult to realistically estimate unpredictable income, considering fluctuating interest rates, property sales, and future political environments. How can you sensibly budget well into the future for food, health care, tax increases, or travel? Who can be sure of their own longevity?
Planning your life portfolio
Rather than depending on invalid financial precision, another aspect of retirement is to define and describe your life vision, establishing a platform from which to save and invest with purpose. Only once you have decided what you want as a meaningful target can you set the trajectory for implementation. To complement the financial projections, consider the broader question of what direction you want your retirement life to take.
Retirement is a time for reckoning. You may need to focus on a new daily structure and adjust to a new identity that does not include the status of employment. Perhaps there are relationships that need reevaluating or even mending.
Many successful people resist retirement altogether because they do not want to leave the game. They enjoy the challenges and the chase too much. The money may provide a marker for keeping score but is not necessarily the main motive. There is often great satisfaction in helping others. Billionaire Mark Cuban, owner of the NBA’s Dallas Mavericks, sees business as the “ultimate sport.” After Realtor Barbara Corcoran sold her real estate empire, she began to “reinvent herself” in stages.
Alternative retirement patterns
You need not be fully in or out of the workplace. Many retirement-stage workers linger on the cusp for years, performing part-time activities or just slowing down. They may neither quit work completely nor feel the urge to reinvent their careers. Some move to a new location, but 53% decide to remain in the same home, according to 2022 studies from the Center for Retirement Research.
A life of undiluted leisure might lead to restlessness or boredom. On the other hand, semiretirement allows for structure and purpose, with space for other outlets. Some retirees leverage their hobbies into side businesses. You might also continue working but scale back or shift your skills toward consulting, charity, or humanitarian projects.
Your financial adviser can help you design the retirement that fits your own best definition.
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