From Fixed to Flexible: The New Retirement

In recent years, the landscape of retirement planning has undergone a significant transformation. The traditional notion of working until a fixed retirement date and then having a set fixed income for the rest of your life is evolving into a more flexible and dynamic approach to retirement. Several factors, including the COVID-19 pandemic, shifting work priorities, and the desire for exploration, have contributed to this change. In this blog post, we'll delve into the changing retirement paradigm, explore the statistics behind it, and discuss what clients need to consider in their financial planning.

The Rise of Flexibility

One of the most notable shifts in retirement planning is the move away from rigid retirement dates. Many individuals are opting for a more flexible approach, where they take "breaks from work" during their careers to pursue personal goals, recharge, or explore new opportunities. This approach acknowledges that retirement is not a one-size-fits-all concept and that people have different aspirations and timelines.

According to a study conducted by the Transamerica Center for Retirement Studies, 43% of American workers plan to work part-time in retirement, emphasizing the desire for flexibility in retirement planning.

The Impact of the COVID-19 Pandemic

The COVID-19 pandemic played a pivotal role in accelerating this shift. With remote work becoming the norm, employees gained the freedom to choose where and how they work. This newfound flexibility has allowed individuals to integrate work and life in a more balanced manner. Many have realized that they don't have to wait until traditional retirement to enjoy the benefits of flexible schedules and the ability to explore the world.

A survey by McKinsey & Company found that 30% of global professionals worked remotely more often during the pandemic, and 80% of respondents expressed a desire to work from home at least one day a week post-pandemic.

Shifting Work Priorities

The pandemic also led to a reconsideration of work priorities. People began to place a greater emphasis on job satisfaction, work-life balance, and overall well-being. The desire for a more fulfilling career and life experience has driven individuals to seek opportunities for breaks or sabbaticals during their working years.

A survey by FlexJobs found that 43% of workers said they would consider quitting their job if they were not offered flexible work options.

Another survey by LinkedIn found that 53% of workers are more likelt to consider a job with a company that offers sabbaticals.

Statistics on Changing Retirement Trends:

• - According to a 2021 survey by Prudential, 43% of workers plan to take a "sabbatical" or a "gap year" at some point in their careers.

• - Remote work has become a desirable option for many. A FlexJobs survey found that 65% of respondents wanted to remain remote post-pandemic.

• - A study by Airbnb in 2021 revealed that more than 10% of its hosts were over the age of 60, indicating a growing trend of older individuals exploring the world while working remotely.

• - The National Institute on Retirement Security found that 66% of workers between the ages of 21 and 64 were concerned about their retirement security.

What You May Need to Consider

For those of us in the workforce now, this evolving retirement landscape may require a reevaluation of our financial plans:

Flexibility in Savings:

You may need to adapt your savings strategies to accommodate intermittent periods of work and leisure. You may also want to consider what your prioritize about your current work situation. Is it that pension that seemed vital for your parents, or are you more keen on flexible work options and savings patterns?

Lifestyle and Budgeting:

Understanding how your financial needs change during periods of exploration and relaxation is crucial. There may be times where you rely more extensively on your savings vs your income. During these phases, knowing your lifestyle options, and budget inside and out (where you can cut and where you still need to spend) will be imparative. Take it from a seasoned digital nomad and Certified Financial Planner - you will LIVE in your budget spreadsheet :)

Investment Strategy:

A flexible approach to investments may be necessary to align with changing retirement timelines and income fluctuations. Make sure you understand lock up periods, fees, early redemption schedules and tax implications on all of your investment options and account types.

The Role of Your Financial Planner

In this changing landscape, your financial planner needs to be well-equipped to guide you in making the best deicisons possible with ALL of the revelvant financial information. Your planner should be prepared to offer customized solutions that align with their your aspirations for flexibility and adventure, multiple scenarios and the corresponding implications for you to consider, and education on items like tax consequences and future impacts. At tis point, it is advisable that you are working with a financial planner, to get the proper planning advice and education.

The concept of retirement is evolving from a fixed endpoint to a flexible journey we each can design for ourselves. Whether it's taking breaks from work, exploring the world, or finding a more balanced work-life approach, individuals are redefining what retirement means to them. Financial planning is becoming more dynamic, and financial planner must adapt to cater to the changing needs of their clients in this new era of retirement planning.