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Retirement could be the ultimate financial and personal goal for anyone over the age of 50. But I think it’s time we redefined the word.
It’s stereotyped as the perfect time of life, when you stop working and can live your life to the fullest, taking long holidays, spending time in the garden and resting. But as we live longer and longer lives, is it practical or sensible to stop working completely? Or should we contemplate a different way of thinking about retirement, one that sees us retire more gradually and enjoy the period before retirement as much as the period after it?
Retirement is stereotyped as the perfect time of life. But is it really practical to stop working completely?Credit: iStock
My suggestion is that we all start to think about retiring as a stepped process that gradually moves us along a retirement continuum, slowly and incrementally morphing our way of living, and our income into a retired state over many years, if we can. That would allow us to enjoy the benefits of work, like social engagement and pursuit of meaning, which have been shown to positively impact our health and wellbeing.
At the heart of this continuum is the definition of modern retirement. I define modern retirement as the time in life when we can afford to live off various sources of passive income and choose what we do with our time. That choice should, where possible, include staying in the workforce if we like, both for financial and personal reasons.
But it would be a choice at that point, not an obligation or need. And for it to be a choice we need to have a level of financial confidence and security, which most people establish over time, as they learn to live on their combined income from the age pension, superannuation account-based pension and investment incomes.
Think about how the continuum really could work for you. At the beginning of the continuum you might still be engaged in traditional full-time work, but you know you can start to draw some income from more passive sources. You might start by dropping a day a week of work to spend with a grandchild or participating in community activities you really enjoy and build confidence in living on that smaller passive income while still earning a wage for four days.
Full and structured retirement might not actually be the ultimate goal for incoming generations – but living a life of choice can be.
Then, months or years later, you might drop a second day, or even a third, picking up hobbies you love, spending more time on your health, or in your community. Maybe you even start a small business.
As you move down the retirement continuum, you can pursue less and less formal work, but you don’t necessarily have to stop working. There are plenty of options for part-time work, flexible work arrangements, and reduced hours allowing you to take longer sabbaticals too. The key is that you don’t have to put yourself into full retirement to have balance and leisure time in your life.
There are two small problems with this under the current rules. The first is that the government currently requires a rather rigid shift into retirement to move your superannuation into retirement phase. But, the reality is that you only have to meet the conditions of release once in your life to move your superannuation into a state where it can provide that income. And before that, you could consider a transition to retirement pension.
The second is that once you reach pension qualification age at 67, your pension income will decrease after you earn more than $11,800. To me, this just becomes an important time for a cost-benefit analysis that takes in how you value work in your life, both financially and from a fulfilment perspective.
The traditional setting a date and stopping culture to retirement raises significant concerns. There are also powerful reasons why embracing the retirement continuum could be a good thing for everyone in the run-up to retirement.
Firstly, not everyone can afford to just stop working. There’s a perception that everyone can afford to give up work and retire at 67, but that’s simply not the case.
The reality is that the average superannuation balance of $150,000-250,000 for Australians between the ages of 55 and 74 is not enough superannuation to live comfortably throughout their retirement. Most people will need to supplement their pension and superannuation income with work. And it will be important for the government to continue to evolve policies that enable this.
Secondly, retirement does not come with a guarantee of good health. Health challenges can impede our ability to enjoy the golden years if we wait too long, so thinking about living out our goals earlier in life, and juggling work if we have to isn’t all bad.
Current workplace laws require employers to offer more flexibility to workers over 55 and that could support people who want to transition to a work-leisure balance.
Finally, retirement does not guarantee a fulfilling life. Work often contributes significantly to a person’s identity and purpose. Encouraging a part-time retirement or a portfolio life can provide a sense of continued purpose and meaningful engagement in society.
Full and structured retirement might not be the goal for incoming generations – but living a life of choice can be. Do you think the retirement continuum might work for you better than the alternative?
Bec Wilson, author of bestselling book, How to Have an Epic Retirement and host of the new podcast Prime Time with Bec Wilson. She writes a weekly newsletter at epicretirement.net.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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