The 4 Awesome Types of Retirement

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our wildly different roads to retirementA few days ago, I read this great post on Len Penzo’s blog about two paths to retirement …

… a hardworking, straight-shooting early retirement vs. a slow, leisurely traditional retirement.

Len compared the two models to climbing a mountain.

You can either shoot straight up the face, gaining altitude quickly (but sacrificing some scenery during the climb), or you can take switchbacks, acclimate, enjoy a picnic, and eventually reach the summit.

It’s a beautiful analogy, but I think a few routes are missing. I’ve embraced a different style entirely.

Len’s blog post spurred me into thinking about the many models of retirement. I’m going to outline four styles that I’ve encountered. There are certainly more than four models; feel free to voice supplemental methods in the comments.

As a disclaimer: On this blog, “retirement” is different from “financial freedom.” In this post, I’m defining “retirement” as escape from the daily grind. “Financial freedom,” on the other hand, is sustainable wealth. The two are sometimes, but not always, correlated.

There are many ways to escape the daily grind, even before you’ve built sustainable wealth … as you’ll see below.

#1: Traditional Retirement

This is what the average person imagines when they hear the word “retirement.” Work until you’re 65, save 10-15 percent throughout your life, and retire with enough money to support yourself through your golden years. If you did it well, you’ll have enough disposable income to play a few rounds of golf and take a Carnival cruise.

#2: Early Retirement

This is similar to the above model, but accelerated. Earn a high income when you’re young. Save like a maniac. You’ll follow the same basic model (an uninterrupted period of work followed by permanent retirement), but you’ll quit your job in your 30’s or 40’s rather than in your 60’s.

#3: Mini-Retirements

The mini-retirements model is centered on retiring frequently. This model alternates periods of intense work with periods of complete rest. If quitting your job was a sport, the mini-retirements model would be “interval training.”

You might, for example, work for 2 years, save $30,000 during that time, then spend the next few years traveling. If you’re an entrepreneur, you could work two weeks per month, then take the next two weeks off. I’ve heard about others who work for 2-3 months, then take a month off.

This is precisely the model I followed when I graduated from college, worked for three years, and saved enough during that time to spend the next 2.5 years traveling the globe.

This model allows you to escape the workforce while you’re young. Traveling at age 22 is different than traveling at 35. It’s not ‘better’ or ‘worse,’ it’s just different. (If you become a parent during those intervening years, the experience is radically altered). This route allows you to experience freedom and escape at every stage of life, including your twenties.

This mini-retirement model has always been my preferred style, even before Tim Ferris popularized it in his book The 4-Hour Work Week.

#4: Permanent Semi-Retirement

People who are permanently semi-retired never level up to working 40 hours per week. That type of work schedule intrudes on their life too much.

Instead, the permanently semi-retired prefer to coast by, working part-time throughout their lives, but also enjoying ample leisure time which they can spend hiking, gardening, tinkering, and pursuing whatever hobbies capture their spirit.

Many of my friends fit under this category. One friend has never worked more than 25 hours per week, throughout the decade that I’ve known her. Another friend works “only side gigs,” two to three days per week, and stops as soon as he’s “cashed up” for the week.

When I lived in Australia, I spent two weeks at the beachhouse of a 40-something nurse who performed 2-3 house calls per week (one day of work per week), and spent the rest of his time surfing.

Escape the Daily Grind

In addition to those four types of retirement, there are two methods that people use to escape the daily grind:

#1: Quitting
#2: Outsourcing

Traditional- and early-retirement enthusiasts tend to favor the “quitting” strategy. They accept a 9-to-5 job, work hard, and quit when they’re ready.

Mini-retirement enthusiasts tend to prefer the “outsourcing” tactic if they’re entrepreneurs, or the “quitting” tactic if they’re employees. Entrepreneurship tends to be more conducive to this tactic, and the more work they can hand off to others, the longer of a break they can take from their daily grind.

Permanently semi-retired people, depending on their trade, either outsource their work or pseudo-quit (in the sense that they refuse to take on any additional work, beyond the minimum required to live).

Which Style Fits You?

None of these styles are better or worse than any of the others. I’m offering this breakdown so that you can live deliberately, choosing the style that fits you best.

I prefer the mini-retirements approach. I view my career as “interval training,” and I alternate waves of hard work with extreme leisure.

I worked hard from age 21 to 24, saving tens of thousands of dollars. Then I globetrotted, with zero responsibilities, from age 24 to 27. That’s an experience nothing else can rival.

By the time I returned to the U.S., I felt ready for some hard work. I busted my butt again from ages 27 to 29, accumulating six rental units during the greatest cheap-housing opportunity of a generation. Now that I’m on the verge of turning 30, I’m once again on the cusp of another major travel expedition. And I suspect this one will be even better than the last.

That said, I’d be remiss if I wasn’t also building sustainable wealth (passive income) in addition to planning frequent mini-retirements, or mini-escapes, throughout my working years.

Regular Afford Anything readers know how adamantly I emphasize shoveling money into 401k’s and IRA’s, buying rental properties, and creating multiple passive income streams. I encourage anyone in a “working” phase of life to prioritize these.

But I don’t recommend waiting until these are ready-to-roar before you venture off into some crazy adventure. Building sustainable income takes time — at least a decade — and your youth is precious.

****
(P.S. And to those of you who are thinking: “But I’m already old!” — No, you’re not. Each stage of life is unique. And you’ll never be younger than you are today.)

(P.P.S. If you’re a podcast listener, I also discussed this concept on the latest Stacking Benjamin’s podcast. Download it here.)




Comments

  1. says

    This is a great post because it really made me think. Our situation is that we fit into more than one of the styles you’ve described. For example, my husband and I are style # 1, Traditional Retirement, because we have a diversified portfolio made up of four different types of retirement assets. One flaw, however, is that a portion of that portfolio includes my pension plan. And who really knows if it will actually be available when I retire, or if it will pay the monthly amount that is currently estimated.

    Than, we also fit style # 2 because we are working on a side business that we expect will someday be an opportunity for Early Retirement. We’re putting tons of energy and time into it but we love what we’re doing and we expect that it will eventually pay off. This actually brings us to your style #4, Permanent Semi-Retirement.

    Permanent Semi-Retirement is the “jackpot” for us because it actually sounds pretty good. We would like to keep working at something we love. It gives us a focus, keeps us challenged, and still creates a way for us to earn a side income. Our perception is that we need to continue to diversify – everything from savings plans, to retirement plans, to income streams – because that just seems to provide an extra hedge of protection. Conclusion: Having a semi-retirement seems to fit our style.

  2. says

    I’m definitely in the early retirement camp. We have a good idea of the path and timeline from financial independence to retirement and are moving along it.

    I would add a couple more categories. One is a mélange of 2 and 4, perhaps, with a little outsourcing mixed in. It’s the location-independent lifestyle that folks like Sean Ogle and Tim Ferriss espouse. Build a business that doesn’t require you to be in an office and that eventually becomes self-sustaining, and then check in as needed while achieving the lifestyle that you’d normally wait until retirement to achieve.

    Then, on the cynical side, there’s another type: those who, though lack of planning and intentionality in their lives, will find that they cannot retire.

    I love your interval training analogy. Life’s little Fartleks.

  3. says

    I am either a #3 or #4. I have finally become honest with myself about how I want to live my life. Working like a dog isn’t appealing to me anymore. I want to work smarter than I have been. I really enjoyed this post, it made me think.

  4. says

    Recently found your site through getrichslowly.org, and I’m loving it so far!

    The idea of working 9 to 5 with only 2 weeks off a year until I’m old makes me die inside, even if I was being paid to do something I love like read classic literature with a sleeping cat on my lap.

    I think I’ll use the mini-retirement model while I’m young (I’ll be 24 soon), then permanent semi-retirement until I’m too old to work.

    You’ve inspired me to start saving for my own globe-trotting adventure. Now I have to decide how to allocate my savings. I’m not sure whether to prioritize the travel fund, retirement investments, or paying off my relatively small student loan balance.

    • says

      @Yoonz — Awesome!! I feel the same way that you do: the idea of 9-to-5 with 2 weeks of “paid time off” makes me want to stab myself in the eyeball with a rusty fork. Ughhh.

      Yes, save for a globe-trotting adventure. You won’t regret it. Make a little progress on your retirement and student loans, too, but don’t become so obsessed with retirement/loans that you squander your twenties.

    • says

      Good for you Yoonz. You figured it out early enough.
      I’d prioritize your student loan balance, even if it’s small.
      The first step to ultimate freedom is to be debt free. If you start with any of the other options, that debt will still feel like a burden and will keep growing (’cause you will be accumulating interest, slowly but surely.) Just get rid of that, and then divide your priorities between the travel fund and retirement investments. You can afford it ’cause you are still very young. You don’t want to miss out on travel but at the same time it’s never too late to start saving up for retirement. Especially ’cause you chose semi-retirement. Speaking from experience :)

  5. says

    I think I fit into the permanently semi-retired life, though I do work 30 hours a week and that doesn’t include side-gigs. Luckily, I really love what I do and get lots of vacation (benefit of a teaching job). Now, I just need to expand my streams of income; rentals may be in my future. 😉

  6. says

    Mini-retirement has been my style ever since I became a freelancer. Worked a few years, saved a boatload, then took the rest off, with no real stress about having to find a contract again. If I can’t find a contract within the next year or two (unlikely), I will join a company as my last resort. Otherwise.. forget it, I love my lifestyle.

  7. says

    I think I’m currently a #4 wanting to be a #3. I love the idea that any one of these paths is acceptable and each has its pros and cons. Working into my old age isn’t a bad option if I get to spend parts of my entire life (including my youth) traveling and having “retirement like” experiences. Great post!

  8. says

    Retirement means so many different things to different people, but almost all of them mean only having to work when you want to, not because you have to.

    I’ve had all three kinds of luck (bad, dumb, and blind) on my road to financial independence. I’m looking forward to the next big push to take me to the next level of security where I’m out of the jungle and can clearly see the path ahead.

  9. says

    I think I’d consider the mini retirement model as more of a sabbatical and less of a retirement. I’d love to retire early. It’s one of my goals to retire as early as 50. However, it will probably be a semi-retirement, because I really do love what I do.

  10. says

    We’re in a kind of unique situation. Both my husband and I are disabled. He also brought $20,000 in student loan debt with him. He was able to work the first couple of years we were together. I wasn’t able to work much at all during that time. At 31, I found a miraculous job/boss who let me work from home. So the last three years are the first time we collectively earned over $35,000.

    For that reason, we really weren’t able to put anything into an IRA until recently. We put $100 a month in for the last four years. This past year, I was able to up to $300. Next year, I’m shooting for $500. Even so, we’ll always be pretty far behind a lot of people on the retirement savings front. Especially because we have some big bills looming, like my husband needing a full set of dental implants. That’ll be $20,000-30,000.

    All that is okay, though, because I would like to work as long as possible. Having been unable to work, relying on a $800 check from SSA to live on (in Seattle), getting a check means the world to me. It makes me feel safe and powerful.

    Do I love to actually work? No. But what I do is relatively easy, and, more importantly, my boss is amazing. He works around my limitations, and he’s been very generous with time off for some minor surgeries

    I’d definitely like to be more financially secure and take a couple of vacations every year. But I can’t imagine giving up the reassurance of a paycheck.

    • says

      @Abigail — In your situation, the secure paycheck (coupled with the amazing boss) sounds like the best option. Personal finance is personal, which means there’s no one-size-fits-all “best” choice. You and your husband are dealing with a very challenging set of factors, and it sounds like your current job and current boss are the best choice for your situation.

      That said: Have you considered going overseas to get your dental care? I get dental work done in Thailand, which has incredibly high-quality doctors, top-notch hospitals, and costs pennies on the dollar. Even after adjusting for the cost of airfare and hotel, it’s still much cheaper to fly to Bangkok.

      Costa Rica is also well-regarded for it’s “dental tourism,” though I haven’t personally gotten any treatments done there. (I do need to get my wisdom teeth removed soon, and I’m thinking about heading to either Costa Rica or Colombia for the procedure.)

    • says

      you guys are probably doing the best you can. but here’s another idea for you (besides ‘dental tourism’ – which i also heard works great for many people; Colombia is another – and much closer than Thailand – medical tourism destination). i do not know what you and your husband do professionally, but maybe you could figure out what you are (collectively or individually) good at and start an online business based on that (in addition, not instead of your regular job). if you need extra training, take some online courses. do self-study. and then launch your business. it may take a while to get paying clients. but worth a try, don’t you think? this way, you can put more cash into your retirement savings plans and feel more secure about the future. in one idea doesn’t quite pan out, try another one. what have you got to lose?

      • says

        @Alexandra — Love the way you think.

        I proudly haven’t held an “office job” since 2008. I run an online business, from my laptop, full-time. :-) And I’m a huge proponent of developing multiple streams of income, especially passive income through investments — many of my blog posts discuss this topic. Take a look around the site, and welcome to the Afford Anything rebellion!

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  12. says

    A solid review of the types of retirement. I wanted to bring up that one way to speed up your early retirement or have a more enjoyable traditional retirement and well I guess semi and mini retirement too… is to move someplace overseas that has a lower cost of living. In a place like Costa Rica you get that, plus a good quality of life, year-round warm climate, beautiful surroundings, top notch – and cheap – medical care and a lot more. A lot of retirees in all the categories are in the country really enjoying new lives overseas.

  13. says

    I think mini retirements sound like the most fun option, since I’d probably drive myself crazy if I didn’t have any work to do.

    I have a similar story (I’m 27) in that I traveled after college, and am currently busting it (bought house, 9 condos, and a commercial property along with starting a photo booth business while working full time) and hopefully will have a lot more freedom in my thirties. Just stumbled on your blog and I enjoy it!

    • says

      @Ryan — Wow, we have very similar stories!! That’s awesome!! Good for you for busting it now. This is an awesome time to develop passive income streams, so that you can keep traveling (or doing anything else that you want) for the rest of your life. :-)

  14. says

    Sweet site, man!

    I’ve recently hit the semi retirement scene at 34 and it’s frickin excellent. I haven’t worked in 4 months apart from playing music which may not be classed as ‘work’ by some. Went overseas for a few months, cool and am generally living life the way I feel I should be. Bought a few rental houses over 10 years and sold most of them to pay down the mortgage and just keep one with a good rental return for now, that should be enough on it’s own to keep the Wife & I going until we die if we’re smart about it. I could go back and work my ass off for more but life’s way too precious to be doing that. We have plenty. Just got to pay off all your loans and you’ll be suprised how little you need to live well!

    We have 3 more holidays planned for this year in between part time work and are happy with that balance.

    Cheers and good luck to you all! LUCK (Labouring Under Calculated Knowledge)

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