There’s More Than One Way To Retire

Why be normal, you might have asked yourself on occasion. Turns out, with retirement at least, there’s really no such thing.

What you might think of as the “normal” way of retiring — leaving full-time work at a traditional retirement age and never working again — isn’t that common after all. Only 37% of U.S. workers retire from a full-time job and stay retired, according to a recent study, focused on people in their mid-50s through age 71, by the Rand Corporation, a nonprofit research organization.

Meanwhile, about 14% of people “retire” to a part-time job. Another 17% quit their full-time job and retire, only to return to the workforce some time later, according to the study, which was based on data on 2,920 people who were surveyed over 14 years by the University of Michigan’s national Health and Retirement Study.

About 26% of people continue to work, either full time or part time, past age 70, the study found.

“In the U.S., nontraditional paths are very common — only around a third of people are doing this traditional retirement,” says Peter Hudomiet, an associate economist at the Rand Corporation and co-author of the report.

Rick Kahler, a certified financial planner and founder of Kahler Financial Group in Rapid City, South Dakota, isn’t surprised by the findings.

“I’ve had clients quit and go back in two years,” Kahler says. “They get bored. At first it’s usually great because it’s like being on vacation, but for some people that’s not really sustainable. Ultimately, a person that goes back probably didn’t visualize or think through fully what retirement would be like.”

In other cases, a significant life event — such as a spouse’s death — or financial difficulties might play a part in people returning to the workforce.

Personality plays a part

The study also looked at whether our personalities might affect our retirement decisions. A clear link was found between being extroverted and staying in the workforce longer, in a part-time job, even after controlling for other factors.

“We saw that extroverts were more likely to work longer, but only in part-time jobs,” Hudomiet says. (The Health and Retirement Study asks people to self-report their personality type, based on responses to a series of questions.)

Of course, many different factors go into determining how and when we retire. The three strongest predictors of people taking the traditional retirement path, Hudomiet says, are:

  • Wealth. The more money you have, the earlier you will retire, on average.
  • Health. If you have health issues, you’re more likely to retire and not return to work.
  • A traditional pension. People with old-school pensions are likelier than others to retire and not return to work.

What this means for your retirement outlook

Unfortunately, no study is going to forecast your future retirement path for you. But this research shows how various factors can affect retirement timing.

Here are some steps you can take to determine your retirement timeline:

Check up on your savings. While there are lots of nonfinancial questions to consider before you retire, it’s also true — obviously — that finances are a huge factor in how and when you’ll retire. See if you’re on track with a retirement calculator.

Know what you want. Retirement is about a lot more than just money. Before you retire, figure out your goals and plans. “Actually write out what you will be doing,” Kahler says. “What would a normal day, a normal week, a normal month look like? This forces someone to actually put pen to paper as to how a day looks.” Read more about retirement planning at any age.

Talk with your spouse. It sounds obvious, perhaps, that you’d talk about retirement with your partner. But Kahler says one of the biggest hurdles for couples is when one spouse is suddenly home all the time. “People make assumptions without gathering the facts,” he says. “What is the other person thinking? Do they even think the spouse will be home all day? Does the spouse assume something else? Does the spouse even know they’re serious about retiring?” Talk together about how life is going to look when one or both of you is retired.

Consider backup plans. You might plan to work full time until age 70, but what if you change your mind down the road, or your health deteriorates to the extent that you can’t work anymore? One idea is to trim expenses now so you can hike your savings rate and improve your retirement outlook. Other potential backup plans include moving to a less-expensive locale in retirement, taking out a reverse mortgage, or figuring out other ways to cut costs or boost income, such as taking in a roommate.

Prepare for major change. Retirement is “a big deal,” Kahler says. “Some people are really ready and handle it fine, but most people find the adjustment a little more daunting than they imagined,” he says. “We tell people: Start preparing two or three years before.”

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