There are several key points to consider if you’re interested in a non-traditional retirement or one involving a second career. With the booming innovation economy and rapidly expanding communication technology, people are no longer restricted to one career or even location. Traditional methods of financial planning focus on wealth and capital accumulation during the working years, to fund a retirement that involves spending capital and enjoying leisure. For a non-traditional retirement that involves an innovative work/life balance, flexibility is as critical as accumulating capital.
Planning Ahead
We all love to plan ahead (ya know, except for folks who don’t)–planning for the future gives us something to look forward to when work and everyday life seems a burden. A factor to build into your planning, though, is the unforeseen future. There is no way to plan ahead to cover everything that could happen. Rather than a plan that tries to cover the future in detail, build in flexibility from the start; the ability to change course and direction without wrecking the plan.
Multiple Income Streams
Rather than a plan to fund retirement solely with capital accumulation, consider the benefit of having several income streams. Investing in real estate, business partnerships, and investments, in addition to pensions, may provide a balance between risk and return into the future. It is also increasingly popular for retirees to transition to a more enjoyable and rewarding career that still provides a paycheck rather than retire completely. The gig economy and the local peer to peer economy are both giving nonconformists opportunities.
Managing Debt
Work on habits of managing discretionary spending and debt. Staying out of debt, especially credit card and other high interest rate debt, is a critical first skill and habit in order to have the flexibility needed for a non-traditional retirement.
Savings
Saving on a regular basis is also a skill that can become a habit, and a critical one for people considering a different financial path. There are many savings vehicles depending on level of risk that is acceptable, but having a minimum of three to six months of living expenses in a liquid savings account is a reasonable safety measure.
Unpredictability
Plan for inflation and taxes, which change over time but never go away. The average inflation rate isn’t huge, but over time it’s effect is cumulative. In 1967, a new car cost about $2,750. The average annual income was $7,300. At any point a newly elected government can change the tax codes significantly. It’s impossible to predict with any accuracy, other than to assume that both inflation and taxes will continue.
Be clear with yourself about what is most important to you. But keep in mind that things can change over time. Interests, passions, hobbies, and even the way you spend a happy Saturday morning in summer can change over time. If you would rather live in a studio and bike everywhere so you can indulge your passion for old bookstores, do that. Trying to walk a path laid out for you by someone else can be crippling.
Keep learning. The old model divided life into the school years, the work years, and retirement. Those divisions are more fluid now. But to take advantage of opportunities, and to be prepared for change that can affect our future, stay in touch with the world and keep learning.
