We have written about the concept of the New Retirement many times over the past decade, but we thought it was worthwhile to do so again, especially considering the state of the work world five years after the COVID pandemic began.
Many people still have a traditional view of retirement – i.e. they envision an age when they no longer work. They move from working full-time to full-time leisure. Leave work on a Friday, sleep in on Monday.
We like to take a different approach to the notion of retirement. We think the traditional retirement model was built for a different era when careers were linear, retirement was a short phase, and financial planning followed a straightforward accumulation-to-decumulation approach.
But longevity and evolving work patterns are rewriting the rules.
We like to target our clients to have the option of full-time leisure at a target age, and we prepare our total wealth plans assuming that no earned income will come in after that age, but we also like to be creative in thoughts around this.
For instance, instead of retiring at 65 in the traditional sense, would moving to part-time at 60 and working 2 days a week until 70 be preferrable? Every week has a long weekend. You pace yourself for a more balanced, 50- or 60-year career instead of a 35-year sprint. Maybe you take a sabbatical or two during that 50-year period…
After-tax income is higher, therefore for every dollar earned, more is kept because the tax rate applied to part-time work is lower. It keeps you busy, with some structure, some time away from your partner if you have one, provides some social interaction and so on.
In 2025, these possibilities are greater than they were just 5 years ago. Working in 2025 has never been better for many people.
As awful as the pandemic was, one of the positive outcomes of it was the ability of workers to work remotely (which potentially can be anywhere), and most importantly, because many more employers are supportive of part-time remote work arrangements.
We have seen this win-win scenario play out with several clients. The employees are happy, the employers are happy. Technology has allowed for this to work exceptionally well. Depending on what you do for work, or what you may like to do for work in an encore career, this scenario may play out for you too.
When work, especially part-time work, is viewed through the ‘it’s optional’ lens, people tend to enjoy it much more. It keeps you mentally and socially engaged and provides a sense of purpose.
After all, getting back 2,000 hours a year that was once dedicated towards work can be daunting. At first, the flexibility sounds fantastic! But then too much unstructured time can lead to restlessness and depression.
We have found the happiest retirees create structured flexibility balancing leisure, purpose-driven part-time work, and community engagement. As you think about your retirement, ask yourself what your ideal day will look like.
We want that ideal day to be the norm for our clients, minimizing the anxiety and the fear of becoming irrelevant (common feelings pre-retirees experience), and to approach retirement with excitement and possibility.
Let’s talk about it!
Understanding Market Volatility in One Chart
We can sum up the markets with what you really need to know about investing in equities with just one chart.
This is a 75-year history of the annual rates of return for the S&P500 and the maximum annual intra-year drawdown for the S&P500.
What this chart tells us is, the average return for the index over the past 75 years is 11.6%. Sounds great. Sign me up for those returns.
What it also tells us is that the average intra-year drawdown investors in the S&P500 index experienced was 13.6%.
Translation – to enjoy the 11.6% average return, investors needed to put up with seeing their portfolios decline on average 13.6% during any given year. Sometimes much more.
What’s interesting is some of the numbers are a little jarring when looked at in isolation.
Look at 1987, the year of the famous October Crash. Despite a 33.5% correction, the market had a positive 5.8% return for the year. That would have been tough to experience, but if you ignored the short-term noise and remained invested, you would have enjoyed a reasonable rate of return, despite the pullback.
We hope you have a wonderful start to Spring. April will bring a federal election on the 28th, and hopefully some warmer weather, sunshine and blooming gardens. Enjoy!
322-1005 skyview drive
