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Types of Retirement Explained


The prospect of retirement sparks a myriad of questions about how much you have saved up, where you want to live and when you plan to start. Retirement used to connote a post-work life of leisure on the front porch or golf course, with some travel thrown in. But that might not be the type of retirement that works for you. Maybe you struggle to save and need to stick to a strict budget. Or perhaps you want to keep your mind sharp and don’t want to lose the social interaction a job provides. If you’re considering the different types of retirement, here are a few options to get you started.

A financial advisor can offer valuable guidance as you weigh your retirement options.

What Is Traditional Retirement?

When you say “retirement,” most people think of traditional retirement. In this scenario, you work for the normal span of time, likely into your 60s. Then, you leave the workforce for good. So, there are no part-time jobs or side hustles. Instead, you sit back, relax and enjoy the years off that you worked hard to earn.

Traditional retirement requires a reliable amount of savings. Often, assembling adequate funds relies on starting early, investing wisely and holding off on your Social Security benefits for as long as possible. That way, you have the maximum amount waiting for you.

Remember that your withdrawal rate from your retirement account depends on your life expectancy. A person with very good health and an uncomplicated medical history has the potential to live well into his late 70s (or even 80s and beyond). So your savings should reflect how long the money needs to support you and any others, like spouses or dependents.

What Is Partial Retirement?

There are a number of retirees who choose to continue working after they leave their careers. They generally fall into the partial retirement category. People who choose this path tend to pick up a flexible part-time job with fewer responsibilities than their previous occupation. Or it may involve a passion of theirs that they couldn’t explore before.

A retiree may decide to keep up some level of employment for a few reasons. One is financial. Living a partial retirement lifestyle helps you boost your retirement savings for a longer period of time. Since you have some money still coming in, you don’t have to withdraw as frequently or as much from your savings. That way, your nest egg gains a longer lifespan.

Also, if you plan to work for a time after you retire, you don’t have to build as big of a nest egg. That allows you to be less strict with your savings plans leading up to retirement.

What Is Temporary Retirement?

Retired couple on a beachWhereas traditional and partial retirements set a finish line for your career life, temporary retirement does not. Instead, people who want this option only retire for short periods. They work for years in one field or career and then take time off for a while. It may last anywhere from a few months to several years, depending on the individual and his finances. A temporary retiree might not return to the same occupation. He may take an entirely new type of position in the same field or choose a completely different job. It depends on the person’s financial goals and personal preferences.

The drawback of a temporary retirement is that it requires complicated financial planning. You can’t save as much as someone with a long-term career, and you likely have to start withdrawing early.

Assessing Which Is Right for You

The right type of retirement depends on what you want out of life, both now and in the future. For example, you may be looking forward to spending your golden years work-free. In that case, you need a traditional retirement and the financial security to go with it. That typically requires a job and compounding savings up until your 60s.

By contrast, some people enjoy working. Seniors are especially prone to loneliness, and a part-time job gives them opportunities to be around people. It also keeps their minds active and boosts their savings. So, if an unexpected expense pops up, they still have time to recover from it and lessen the burden on their nest egg. However, retirees can also look into volunteering if they want a purpose without the responsibility of work.

Or, there are individuals out there who don’t like the regularity of a traditional or partial retirement. Of course, eventually they will be too old to return to the workforce. But up until then, they want to experience new things and take breaks at their leisure. This may not just give them personal freedom but help them keep up productivity when they jump back into a job. Of course, a temporary retirement comes with financial consequences; the other two do not.

The Takeaway

"Happy Retirement" cardOverall, the best type of retirement for you depends on who you are. Focusing on financial security may encourage you to choose a traditional path. In comparison, if you want to deviate from the norm, there are other options to consider. Generally, the best retirement balances your needs with your wants. If you have concerns about your current retirement plan, consider speaking to a financial professional, such as a retirement planner or financial advisor. They can help you adjust your plan to fit your future goals.

Tips to Help You Save for Retirement

  • Social Security benefits are important for any retiree. However, they may not fully support you in retirement. Instead, they’re designed to supplement your savings. Using our Social Security calculator, you can see an estimate of the benefit amount waiting for you – and plan accordingly.
  • On top of that, you may want to review your savings to see if you are on track. Our retirement calculator can help you decide if your current plan works or you need to revise it. If you’re not sure what to compare it to, use our cost-of-living calculator to find out the level of income for your desired lifestyle.
  • You know what you want out of your retirement. But you may not know where to put your money to achieve it. If you’re unsure about your investment strategy or portfolio, consider hiring a financial advisor. With SmartAsset’s matching tool you can connect with up to three local financial advisors for free and in just minutes. Using their experience and know-how, they can guide you toward your financial goals. If you’re ready, get started now.

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