Quitting the workforce all at once isn’t for everyone.
The traditional view of retirement involves a clean break from the workforce to focus on other aspects of life, like travel, family, and hobbies. But as with so many other things, many in the younger generations aren’t interested in following the retirement paths their parents and grandparents took.
A recent Fidelity survey found that 60% of Generation Z and 58% of millennials say traditional retirement isn’t a goal for them. Here’s what they envision their retirements to look like.
What does the new retirement look like?
The rapid growth in hybrid and remote work since the pandemic’s height has caused many to rethink what their future could hold. Two-thirds of those Fidelity surveyed said they’d prefer a phased retirement, where they gradually reduce their hours over time, rather than stopping work abruptly. Many are also considering relocating in retirement or traveling in retirement, possibly while working remotely.
These are great options for those who worry about losing social connections or a sense of purpose when they leave the workforce. A steady paycheck could also keep retirement costs manageable. Many Americans, especially young workers saddled with a lot of student debt, have difficulty saving for their future. This could be another reason why so many are looking at alternatives to a traditional retirement.
Is it right for you?
Whether this new approach to retirement is right for you depends on your preferences and your finances. Think about how you envision spending your retirement and whether there’s room for any type of employment. If so, think about the type of work you’d like to do, the time commitment required, and how much it would pay.
Use this information to guide you when planning how much you need to save for retirement. Don’t make the mistake of assuming you won’t need any personal savings because you don’t plan to officially retire. People are forced to retire unexpectedly all the time due to layoffs or family or health issues. It’s always best to have a nest egg as a backup plan, if nothing else.
What if you don’t want to work in retirement?
Working in retirement isn’t everyone’s cup of tea, and that’s OK. But the fact remains that many people who may not want to work in retirement will have to do so to make ends meet. It’s not ideal, but there are some steps you can take to reduce how much you have to rely upon a job in retirement.
First, prioritize retirement savings as much as possible while you’re young. If you’re eligible for a 401(k) match, do your best to claim it every year. And if you don’t have access to a retirement plan through your job, open an IRA so you can set aside funds on your own.
Maximizing your Social Security benefit is another wise move. You become eligible at 62, but often it’s those who delay for a few years who get the biggest lifetime benefit. But this might not be feasible for you if you have a short life expectancy or you’re forced to retire early and need help with your bills.
You may also be able to count upon other government benefits, like Medicare, Medicaid, and Supplemental Nutrition Assistance Program (SNAP) benefits, if you qualify for them. But even following the above steps, you might have to push your retirement date back further than you’d like.
You may not have to delay as long as you think, though. In addition to giving you extra time to save, delaying retirement enables your current savings to grow for longer while reducing the length and cost of your retirement. Even a few months can make a big difference.
It’s worth sketching out some sort of a retirement plan if you haven’t already done so. But be prepared to adapt it as you get closer to retirement age. A lot can change between now and then.
