A noticeable trend is a desire for financial independence over the traditional notion of retirement. Some may wonder what is the difference in financial independence. It is about choices and flexibility. My observation is that some, if not many, are finding the idea of traditional retirement is wholly unappealing to them.
Age 65, Really?
This is understandable since the entire notion of retirement and the age of 65 being the norm is no longer relevant. The age of 65 was initiated in the 1880’s by Otto von Bismark in Germany. It was based on the concept that if someone was still alive at the age of 65 society should provide a minimum level of security. Considering the average male life expectancy at the time was the age of 47 he had a great point! Think about that life expectancy was exceeded by more than 80% at age 65 in the 1880s!!
The United States recognized the importance of financial stability when it instituted the Social Security system in 1935. Of course, many things have changed since 1880 and 1935, The advances in medical care that have led to longer life expectancies. Being financially independent has many different challenges today than the 1880s.
Has The Situation Changed?
Growing up, it seemed that people worked hard, retired in their 60’s and died a few years later. The notion of a retirement that lasted 20-30-40 years was clearly not at all common. While it is fun to think about being financially wealthy, most simply would like to feel that they can live a comfortable lifestyle. A comfortable lifestyle based on what they want not what someone else wants.
In many career paths today, options exist for work past the traditional retirement age. For many, involvement in some type of employment or continued career options can provide intellectual stimulation, In addition, the social engagement that many miss post-retirement is also a factor. Yet, one must be financially (independent) flexible enough to be able to participate in volunteer and/or paid work. Financial Independence allows for choice. The choice to decide what is best for you. In working with many people over the years, it is amazing how the knowledge they have the financial independence to work or not, affects their attitude. Belief systems about work and its positive value occasionally become a primary focus.
In an article entitled: ”The Case Against Early Retirement” the author writes about some of the health issues associated with early retirement. Another article, writer Glenn Ruffenach of the Wall Street Journal shares some of his experiences in the first few years of a “semi-retirement” journey. I got a lot out of his description of “engagement” versus “freedom”.
Need to Define Financial Independence on Our Terms
Financial Independence, at least from my perspective, allows for the notion of “engagement” to coincide with “freedom”. It would seem that a worthy goal is to create a financial strategy that honors and respects both engagement and freedom. The pure liberty to shift back and forth between both and to NOT be concerned about finances. The ability to focus on a passion or to engage in ways to help others. To be able to “take a break” from “whatever” to enjoy. Ability to immerse oneself in an activity and be able to shift one to another at will.
Through planning, each of us can plan to create a level of financial independence that can provide the freedom and flexibility to design a life we believe is worth living. That will mean different things to each of us. More family time, travel, a different career, volunteering, and many other ideas. Financial independence is about having the resources to do what you want to do and acknowledging that things may change and having the financial resources to accommodate potential shifts in the plan that will be appropriate.
Robert Klosterman, CFP® is Founder of White Oaks Wealth Advisors, Inc., a fee-only wealth management firm, and its predecessor R.J. Klosterman & Co, Inc. Bob has been a Certified Financial Planner licensee since 1989. He has a clear vision for the future having worked in financial planning since 1975, and feels a strong need to provide people with expert and independent wealth advisory services. As a Certified Financial Planner and certificate holder for Family Wealth Advising, Bob’s expertise and guidance have helped to fuel the steady growth of the firm. Today, White Oaks Wealth Advisors boasts a talented staff of advisory professionals, hand-picked for their financial planning and wealth management knowledge as well as their dedication to client service.