The more I think about retirement, the more I realize it’s a very loose concept. You hear in the media how many Americans can’t afford to retire. If retirement itself isn’t very well defined, what exactly does it mean by saying someone can or can’t retire?
Blogger Pete MMM was profiled in a Washington Post article Meet Mr. Money Mustache, the man who retired at 30. The article said he and his wife “retired from middle-income jobs [at 30] before they had their son.” Detractors say they didn’t retire. They just changed jobs, from engineering to home building, then to blogging.
I included this article in New York Times in my weekly digest a few weeks ago: Coping When Not Entering Retirement Together. It profiled couples of whom one stopped working and one is still working. If you are retired when your spouse is still working, are stay-at-home parents all retired?
Then I read this other New York Times article about people starting a different career or business after they retired: Childhood Dreams Can Inspire Rewarding Second Careers. The lead person in the article started an international cultural travel business after she retired from corporate communications. Are all small business owners retired then?
Wikipedia defines retirement this way:
Retirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours.
I think it’s too black-and-white: if you work at all you are not retired. If someone retired and they get contacted for doing some consulting, that shouldn’t invalidate their retirement. I consider some of the people profiled in the referenced news articles as legitimately retired, some not.
What makes a person retired then? We have to look at it from several angles. All are necessary conditions to make someone retired.
A change in pace
You have to retire from something. Having enough money not having to work doesn’t make one retired. Corporate CEOs already flush with money can retire but aren’t retired, because they are still working full time.
Working less than full-time by itself isn’t enough either. If someone never worked, they are not retired. If they always did freelancing work, or part-time or seasonable jobs, and they are still doing those jobs, they are not retired.
No intention to return to full time
The change in pace can’t be just temporary. Going to graduate school isn’t retired. Taking a break to travel the world isn’t retired if you are planning to return to full-time employment in the future. New parents who quit their jobs to take care of their kids but intend to go back to work after kids grow up aren’t retired. They just have a break in their careers.
Working here and there doesn’t make someone not retired, but if one job goes away and they have to find another one in order to maintain their lifestyle, that’s not retired. Having a working spouse doesn’t necessarily make someone not retired as long as they are not relying on the working spouse for income.
Here’s a quick test: if whatever the arrangement ends, can they maintain the current lifestyle? If they can maintain the current lifestyle when there are no more consulting gigs, revenue from the business dries up, or the marriage ends, then they are self-sustaining. If their lifestyle must be scaled back, then they are relying on the consulting gigs, their business or the working spouse for income.
Now you can apply these three tests and tell me who in those news articles are retired and who aren’t.
Say No To Management Fees
If an advisor is charging you a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice.