Retirement is a complicated topic. Opinions about retirement vary widely and there are as many opinions about what retirement means to them as there are people in this world. This list is not meant to be exhaustive. There are certainly many other ideas of what retirement is to others and it is impossible to fully encapsulate all the possible options in one article. All of these also assume there are financial constraints. The "example budget" is included as a link for each of these*. The budget is not meant to represent exactly what people pay but just one way to make it work using a 4% safe withdrawal rate. Feel free to pick and choose the most appealing parts of each form of retirement. I have listed what I view as the "pros" and "cons" of each, but if you have an unlimited budget, you can theoretically do anything. With that said, let's jump right in:
Who said travel is for the young? Many people lament their youth having not traveled enough. But, provided you have the energy/health at an older age, it is becoming more and more possible to itch the travel bug at an older age. The key is downsizing the housing costs. Since you are going to be out and about at all times, a personal vehicle is not necessary nor a massive home. Entertainment options at home are also cut to the bone to save money for food/travel. Food costs are higher since you will be out of your home 6 months a year, where you will probably be paying others for prepared food. The biggest pro? Your Instagram account will get tons of followers as you accumulate world experiences that others dream of, sitting in their rocking chair. Travel credit cards are crucial to stretching the budget and getting perks that will make traveling easier (such as free checked bags and priority seating).
Cities are typically much more expensive than suburbs. My experience is that moving to the suburbs provides lower crime, better schools and better $/sqft. As you get older (or much younger), these become less important for your quality of life. This lifestyle has barebones expenses for everyday transportation: with your location right in the city, almost all of your daily tasks can be taken care of with public transportation, biking, walking and ridesharing services. With all the money that you are saving on traditional expenses, you have the flexibility to outsource a lot of your daily chores: you can pay for additional services such as dry cleaning delivery or grocery shopping. With your time and budget freed up, you have the option to spend more of your money on city entertainment and fine dining.
|Housing (location near popular venues)||Housing (have to go small)|
|Transportation Flexibility (no car)|
Vacationer here refers to bouncing between multiple homes. Every month you are going on a hike in the mountains, planning a ski trip or settling down into a beach chair. Travel expenses are lower than the Vagabond but higher than the City Dweller. Your housing costs will be a little higher since you are bouncing between different areas on your own time. This comes at the expense of some of the more expensive entertainment options, such as shows, movies and dining experiences. Because you are traveling domestically more frequently, a car is necessary and your road trips can be both fun and sometimes draining. The best part of this scenario is the freedom to wake up in the morning and go to a beach house. You are not tied down by a schedule or large overhead.
|Free Entertainment||Paid Entertainment|
Some people see retirement as the time to bring family closer together. To the matriarch/patriarch, a solid home base is necessary: a place where the family can all come and hang out. Maybe it is on a lake that you always enjoyed so you can spend time fishing. The largest expense will be housing. A nice, large house in a good location is most important to have a place for large family gatherings and holidays. This will come at the expense of most other things, but the best things in life are all free. How expensive is a deck of cards to play with your family or a gift that was created with your talents and costing nothing?
This form of retirement is probably the most barebone. You have some hobby that takes money and time. Maybe it's restoring old Camaros. It could be maintaining a large collection of sports merchandise. Maybe it's following the local sports team. Maybe it is going to nice restaurants three times a week. In short, you need to make sure the rest of your budget is tight so that your money is freed up to pursue your passion without worrying about the small costs that might arise. You won't feel guilty getting the dessert at your favorite restaurant, even if it is $8.
|Food||Entertainment (unless that's the hobby)|
As you can see, there are many forms of retirement. The only limits are your imagination and your budget. Make sure your budget carefully considers everything that you will need in retirement. Often you can get more of what you want in another area of life (for example, travel) if you make sacrifices in another (for example, food). Question all your assumptions of what is required and dream big.
*Assuming a nest egg of $800,000; 4% SWR provides $32,000/year; for the sake of the exercise, I assumed 0% tax rate, which can be accomplished by either only pulling from a Roth IRA (or Roth 401(k)) or by keeping earned income below $37,650 for single filers ($75,300 for married filing jointly) and pulling all the income from Long-Term Capital Gains