Friday, 21 December 2007

What is Retirement, anyway?

Came across a neat, thought-provoking post about how to define retirement titled the Five Minute Retirement Plan on the The Financial Philosopher blog. His definition - doing what he wants, when he wants, within reason - has a lot of merit. It isn't age-dependent, it doesn't rely on a specific level of wealth or income. And his admonition not to blindly accept his, or anyone else's definition, to make up your own, has even more merit.

Indeed, these days, I wonder what to answer on the immigration arrival cards when flying back and forth between Canada and the UK because I have not been working in a job but don't rule that out. And what would happen if thousands upon thousands of people defined retirement as our friend above does because they do what they want when they want? Would travel statistical systems go haywire (what do they use that information for, anyway?)? At some point, would authorities get concerned and charge people with providing false information - immigration officer: "retired, huh? let's see, you also checked that the purpose of your visit was business, how could that be? please step aside, we'd like to ask you a few more questions, if you don't mind." ... tasers ready! shunt to suspicious person queue.

So what is my definition of retirement? "The time when I rely on various passive sources of income (government payments and private investments), as opposed to active work (though that may still occur, but by choice), to pay my living expenses with the confidence that I will not run out of money till I am at least 120 years old doing my current activities and pastimes." Unlike The Financial Philosopher I prefer to define retirement directly rather than indirectly in financial
terms. His definition is a little too general, too much of a philosophy of life, albeit a good one, that can apply at any age and under any circumstances. If the definition doesn't provide a distinction between retired and not-retired, then it isn't too useful.

What's your definition of retirement?


dj said...

Choosing to work (or not) without regard to remuneration.

The Financial Philosopher said...

I like your definition, especially because it is yours...

As long as we are following our own "path," the destination need not be specific, especially because it is likely to change in some degree over the course of time.

Using a travelling analogy, it may be prudent to say we want to make our destination "the east coast," rather than saying it must be Charleston, SC.

Five years ago, I never would have imagined being a business owner but I always made certain I was acquiring the skills to give myself more choices. Who knows where I will be in five or fifty years. All I know is that I am headed in the right general direction... on my own path...

Thanks for the reference...

CanadianInvestor said...

Thanks for the comments. I compare our flexible and general definitions to that of someone in a lifetime job, for instance a teacher, amongst which I count several relatives. They have a strict, externally-imposed, cut and dried definition - the point when they "take retirement" and cease being an employee of the education authority. In most cases as well, at that point they have had enough of the grind of the job, are satisfied with their lifetime achievements and may only at the most want minor on-going involvement in their profession. Most seem to want to indulge other interests that have taken a back seat for so many years. On top of that, they typically have a defined benefit pension plan with a formal start date that enforces a hard boundary between retired and not-retired. As you say, fin philo, everyone needs their own definition.

In personal financial terms, I find that the planning and the execution of retirement is considerably more complex for those with a general definition as compared to my teacher relatives. With a defined benefit plan providing 70% of inflation-indexed salary till death, there isn't a whole lot to think or worry about. In contrast, I have four different accounts on which to draw for my living expenses and must decide which ones and when to use how, whether and when to convert to annuities or to RRIFs, whether and how much insurance I need, in the context of investment returns and taxes.

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