Despite what conventional wisdom may lead you to believe, there are many paths to retirement.
Most people follow the same two-phase path to retirement. But, it doesn’t have to be this way.
This statement applies to not only WHEN you reach retirement, but also how you get there and what the transition looks like.
It’s easy to buy into the traditional understanding of retirement as a later phase in life. My initial understanding of retirement was shaped by the experiences of people around me.
Growing up, I did not think about the mechanics of retirement or how retirees could afford to not work. I understood it as a late phase of life that excludes work. I just knew that it happened – either out of necessity and some inability to work or because of a desire to stop working.
I did not witness anyone transition to retirement as a child. It wasn’t until I was a young adult that I saw my aunts and uncles transition to retirement. My father’s older sister and her husband were the first in my extended family to retire.
It wasn’t a smooth transition. My aunt struggled to find things to do with her free time. It wasn’t even six months before my aunt returned to work part-time as a consultant for her former company. She also didn’t return to work for the money. My aunt and uncle did not lack the resources to fund their retirement.
I was very surprised by this. Why would anyone return to work if they didn’t have to?
Since that time, I have now seen many relatives transition to retirement. This includes both my father and father-in-law. Both of whom actually broke tradition and retired early, in their late 50s. Each retired for different reasons. But both were able to retire early because their finances supported the decision.
I’ve come to learn that there are many paths to retirement. The way I look at retirement is now completely different now that Jess and I have been pursuing financial independence. This new understanding has been helpful as we figure out what our journey to retirement will look like.
The Traditional Path to Retirement
Many of us understand the traditional path to retirement. The traditional path to retirement goes something like this:
- Work for 30-50 years.
- Stop working and retire.
There are many issues with this understanding of the path to retirement. The two biggest challenges with this understanding are:
- It requires a 30-50 year working career and associates retirement as a later phase in life.
- It oversimplifies the necessary lifestyle change between step 1 and step 2. This approach to retirement assumes that you can change your lifestyle with a flip of a switch, like turning on a light.
I hate to break it to you, but life isn’t that straightforward or simple. Large lifestyle changes take time to execute. Adjusting to these lifestyle changes also requires time. It’s difficult to go from spending 40-50 hours per week working to not working at all. To filling a specific role or finding meaning in your day job to finding your meaning elsewhere.
The psychology behind this transition has many layers, including the disruption of one’s identity. There’s a growing amount of research that helps identify the challenges of transition in retirement. Josh Osborne, a former psychology professor at the University of Alberta, summarized many of the leading studies on the transition to retirement in his 2012 article, Psychological Effects of the Transition to Retirement. As he says:
The transition to retirement is often a mixture of the expected and unexpected. It has the potential to create major psychological issues that are sometimes overlooked by those who promote a rosy image of retirement.
In his article, he describes the many challenges that retirees face during this transition period. He also underscores the prevalence of these challenges. He cites an earlier (well-referenced) study by Braithwaite and Gibson. They found that as many as one-third of retirees struggle with adjusting to retirement.
In other words, transitioning to retirement is a common and complex challenge.
For a less scientific confirmation of the prevalence of adjusting to retirement, take a quick look at Amazon to see how many books are written about the transition to retirement. There’s a large market for helping retirees adjust to retirement.
How FIRE Reinforces the Two-Phase Journey to Retirement
This traditional understanding of retirement has been met with a new way of thinking about retirement. The new approach is often grouped together under the term FIRE: Financial Independence, Retire Early.
The basic message of FIRE is to accumulate enough wealth to reach financial independence. Your wealth or more precisely your income from your investments can sustain your life/expenses indefinitely. When this happens, you can retire early. Regardless of age, once you reach FI, you have the ability to retire.
FIRE has challenged the assumptions of traditional retirement. Most notably, it has challenged the assumption that you have to be a certain age to retire.
This was one of my first takeaways from learning key concepts of FIRE, especially when I learned about the idea of savings rate.
When I started reading other FIRE bloggers, I wasn’t ready to embrace FIRE completely. I didn’t want to quit my job immediately. But I did like the idea of freedom and some of the fundamental ideas took root.
“If we could just save just 5% more each year, it would cut down our working careers.”
This line of thinking is what got us started on our Anti-Budget, and increasing our savings rate from 25% to over 50% in a matter of years.
Jess also understood for the first time that you don’t have to work 40 for years after she read Your Money or Your Life by Vicki Robin.
The initial motivation for reaching financial independence is often rooted in a desire for more freedom. Either freedom from a toxic job or work environment, or freedom to pursue your passions.
This drives some people to extreme lengths to reach FI as quickly as possible. Practically speaking, this equates to increasing their savings rate as much as possible. This often comes with embracing a deprivation mindset.
Short-term pain for long-term gain.
The irony in this approach, and arguably why some give up on the pursuit of FI along the way, is that in the pursuit of something better, they actually make their life worse (at least in the short-term). Or, they somehow got confused about what they actually wanted in the first place.
Joel from FI 180 talks about his decision to return to work after retiring early. He had every intention of never working again when he left his job. But after 16 months of recovering from burnout, he started a different job. In hindsight, he realized that not working wasn’t what he wanted. Instead, he needed a break to recover from burnout. Then, he realized he wanted a career change that provided him with more flexibility.
It is easy for those pursuing FIRE to lose focus on the ultimate goal. This approach also continues to embrace this two-phase journey to retirement.
The journey to retirement within the FIRE community is eerily similar to the path to traditional retirement:
- Work for X years
- Stop working and retire
As you can see, the only thing that changes is the number of years that one works. The number of working years will be different for everyone pursuing FIRE, depending on a number of factors.
But the steps leading up to (or after) retirement don’t change.
The Mad Fientist is someone who has inspired our own FI journey. He has also talked about how he wasn’t prepared for early retirement. Despite being someone who reflected and blogged about this topic for years leading up to the change, he too didn’t know how to process it. It was such a sudden change for him.
As much as FIRE disrupts the status quo, it is just an expedited version of the two-stage path to traditional retirement.
Slow FI Helps Us Reimagine Retirement
But, it doesn’t have to be this way. Reimagining the path to retirement starts with staying focused on the original goal of the FIRE movement: freedom.
Instead of thinking about freedom as a distant future, we must see it as something that is incremental along the journey.
When you see financial independence as incremental, you don’t have to wait until you reach a certain number to improve your life. You can make small, incremental changes along the way.
Financial independence or the flexibility that comes from it is not all or nothing.
When you approach financial independence with this understanding, the world opens up with possibilities. Different lifestyle options are now viable and can help you work toward your ideal step by step.
It’s with the Slow FI approach that you begin to see career changes, semi-retirement, freelancing, entrepreneurship, mini-retirements, part-time work, and so many more lifestyle choices as options for you. (Side note: if you are looking for inspiration on ways to design your life while pursuing financial independence, we have a great Slow FI interview series of others who are doing just that.)
This has been true for us.
After Jess took time off (and ended up quitting her job to take care of her mental health), we had a decision to make. She could either find a new full-time job or look for part-time work and begin to pursue passion projects. The idea was that these projects could one day generate income and offer us even more flexibility.
We decided to take the unconventional route. By taking a small step to work 3 days per week instead of 5, she had the space to try new things.
We could make this decision because we were pursuing financial independence. We had a high savings rate and large enough of an emergency fund or F-You money.
We had a safety net. We leveraged the incremental freedom that we had to transition to a new phase in our journey.
In less than two years, our expected path to retirement has completely changed. We were on track to follow the traditional two-phase journey to retirement. Two years ago, we thought we’d work until our mid to late 50s, and retire.
We still don’t know exactly what our entire journey (or even the next phases) will look like. But, we do know that we will go through many phases before transitioning to retirement. This includes the current phases of part-time work and entrepreneurship.
This new path, full of small iterative changes, has been exciting. It’s fun to try new things and see progress toward long-term goals. Because we’ve been able to make these changes over time, we’ve been able to slowly adjust to each new phase of the journey and all that it entails.
This approach is very similar to what Professor Osborne advocated in his article for how to better transition to retirement. He says,
Future retirees are well advised to diversify their preretirement lives in terms of recreational activities, hobbies, and membership in clubs and organizations that provide opportunities for building activities and friendships beyond the work world. Taking several years prior to retirement to build what will become a retirement lifestyle can make the transition less problematic.
I’d argue that Osborne is still writing with the assumption that retirement happens at an older age. Instead of thinking about it as a way to take a few years to make the transition less problematic, we can utilize the Slow FI mindset to improve our lives now and all along the way.
Imagine what it would be like if we could make so many small shifts along the way that when we finally hit our FI number, it’s just another day. We wouldn’t need (or want) to change anything about our lifestyles. That’s our dream. We hope the Slow FI approach helps others also avoid the two-phase journey to retirement.
It is the irony of racing to retirement for too many pursuing FIRE that is kind of funny. I’m glad you figured out a different way to go. Seems like more and more people are figuring out this option as well. Thanks for the post!
I definitely agree that it’s ironic. I’m also happy to see others finding other options for their lives.
I’m no expert but I have observed that the people who have problems are the ones who did not have balanced lives. I had a very consuming, high powered, high pressure and highly paid job. I was a textbook candidate for having a crisis when I flipped the switch in my late fifties and left the corporate world. But I’ve loved the first five years of my retirement instead of feeling lost. The reasons are two simple things. First I set up some part time consulting to give me an off ramp to not working instead of an abrupt change and secondly, I have a full life. I was not a workaholic and in spite of having a demanding job I also had many hobbies and many volunteer gigs prior to retirement. So I play tennis, I run, I do pickle ball, I ski, I fish, I off road, I travel, I hike and bushwhack. I volunteer as a foundation board director and serve on a college board of trustees. I am active at church. We travel to see our grown kids who live far away from us. I never had a life focused on work so going to eight hours of work a week just gave me time to get more engaged on all of these other things. How in the world could anyone not love having more time to play and to give back to their community. Only those who don’t know how to play and those who never learned to give in the first place. A good retirement is something that should be planned for decades.
What is the meaning of retirement? It’s that simple. “Happiness”.
Love this post and it reflects the journey my husband and I have taken. We’re in our mid- to late 40’s and we’ve settled into a lifestyle that has us working about 3 days per week. Sometimes we work a bit more, sometimes less. I have two businesses of my own and my husband works for a flexible company. In 2019 we rented out our house and took a year off to travel around the US in a teardrop trailer. We called it spending a year of our retirement early. It was the best year of our lives so far!
One thing you don’t mention in this article is physical health. We’ve watched people older than us make it to retirement and then have steady health declines, essentially compromising the quality of their retirement years.
We’re super active and have talked about taking more time in our 40’s and 50’s to enjoy our physical activities and protect us from the possibility that one or both of us could develop health issues beyond our control and/or not even make it until retirement.
We’re not putting all of our eggs in one basket and instead, enjoying the journey, just as you say. The US culture is screwed up in this way – work and buying crap with your money is all that matters until you’re 65, then it’s time to enjoy life. Sorry you can’t mountain bike, backpack or hike anymore…Guess you should have taken more vacations…
Spending a year traveling with a teardrop trailer sounds amazing! I love the idea of doing a year of your retirement early. I also agree that health is incredibly important. Perhaps, I’ll update this post someday, so I’ll make sure to include that.