First Person: Knowing Our Retirement Type Helps Us Budget for the Future

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A recent article on ConsumerismCommentary.com written by the website's founder Luke Landes, touched upon several different types of retirement. I thought it was an interesting piece, since -- as many people might -- I tend think about retirement, but haven't necessarily broken it down into types of retirement. However, as the article notes, "While every situation is different, there are only a few types of retirement for those of us in the working class."

So what type of retirement is right? Well, I guess it kind of depends.

Reviewing retirement types

The ConsumerismCommentary.com article mentions several different types of retirement. The four types it touched upon included:

  • The working retirement: This retirement type, according to the article, "may include downsizing from a career to just a job, or it may signify a late career change."
  • The reliant retirement: "It's fallen out of favor in modern American culture, at least for now, but sometimes the elderly who can no longer work to support themselves and who aren't prepared to be financially independent in their retirement, can move in with their children."
  • The draw-down retirement: Here, the retiree can "…can afford retirement - perhaps not everything she dreamed of, but at least living enjoyably - by reducing the size of her assets each month."
  • The independent retirement: "They live off their interest and dividends from investments. For the working class, this is achievable when assets, invested in a good mix of stocks and bonds - relatively safe but by no means invincible to market forces - reach a level of twenty times what's needed to cover expenses each year."

Picking what works for us

With a good 30 years at least until when we seriously begin to contemplate a full retirement, I like what I see when I review Mr. Landes's retirement type options. And I think that if more people considered a variety of such options, they might not find retirement planning as difficult as so many do. Of course, we have to pick what works best for our particular situations and that fit with our picture of what retirement will be.

Combining types and adjusting our retirement savings plan accordingly

Personally, I don't see any one of the above retirement options working for us. Instead, I see a possible combination of several or even all of the options to some degree. As a self-employed person who enjoys what he does, I would like to continue working part time in retirement, while my wife will likely retire in full. And while we don't plan on living with our children -- or vise versa -- having them close to us could provide support for both sides. And though I would prefer an independent retirement in which we live off of things like interest, dividends, and Social Security, things can change a lot in 30 years, and the stock market can change a lot in just hours, so forging a plan that also combines elements of independent and draw-down retirement options could build flexibility into our golden years.

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Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

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