How do you define retirement?

I was recently discussing retirement planning with a group of engineers and asked if they could help me with an informal “show of hands” poll to determine how long before they planned to retire. Before I could even start the poll, someone asked, “What do you mean by “retirement”? People laughed, but it wasn’t a facetious question. In fact, it’s a very good question and one that each person needs to answer before they start retirement planning.

When does retirement start? A few decades ago, people worked full time until they stopped. But today, according to surveys more and more people are looking at retirement as a process rather than as an event. Some studies indicate that as many as 90% of Baby Boomers want to continue to work beyond conventional retirement age. Rather than stopping full-time work abruptly, we see a trend toward either working part time or cycling between periods of work and periods of pure leisure. Still other workers are planning to leave a high-pay, high-stress career for a low-stress labor of love. These people plan to work until their mid-50’s or 60's, then transition to part time or temporary work (possibly a change of career) then retire completely. They are planning a “transitional retirement”. The only problem with this view of retirement is that it makes the point when retirement begins difficult to define, and that presents a retirement planning challenge.

Retirement planning is complicated further by the fact that people don’t have the same ideas about how they want to spend their time in retirement. Some people want to travel the globe. Some want to sit on their porch in their rocking chair. Some want to cultivate family and friends while others hope for solitude. Some anticipate involvement in causes as a volunteer while others hope for peaceful seclusion.

Here's some background history on retirement age/lifestyle. Prior to the Social Security Act of 1935, most people were not able to retire until they became too frail or sick to work. Since then, the average age of retirement has dropped monotonically every year until very recently. Between 1950 and 2000, the average age at retirement dropped from about 67 years old to under 62. About 60% of Americans over 65 consider themselves completely retired. It is no accident that the age when Social Security benefits are first available corresponds exactly with the average age of retirement. According to the US Bureau of Labor Statistics, nearly half of all seniors would be below the poverty level without social security.

Retirement trends among technical workers do not vary that much from those of the general population. According to the National Science Foundation, engineers and scientists with BS or MS degrees quit working full-time at an average age of 62. Those with a Ph.D. do not stop working full time until age 65. It is interesting that the number of technical workers who work only part-time increases for all degree earners between the ages of 55 and 65 – transitional retirement.

Of course no one vision of retirement is right or best, but regardless of the vision, surely one goal they all have in common is the need to achieve a level of financial independence. Financial independence provides freedom for wage slaves. What one chooses to do with that freedom – recreation, leisure, volunteer, part-time work, or change of career – is entirely up to them. Even if you choose to die in your cube, financial independence makes certain aspects of the job easier to take.

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