Three Kinds of Retirees

January 04, 2022

In my world view, there are only three kinds of retirees:

The first are Regular “Old Fashioned” Retirees. They work for a full career, reach the magic age of 65 or 66, maybe collect a gold watch, and then begin the process of using pension, Social Security, and retirement savings to spend for the balance of their years. Most of retirement planning literature is focused on these lucky ones.

The second group of retirees are a new breed. These are the FIRE Early Retirees. FIRE stands for Financial Independence, Retire Early. For FIRE retirees, the goal is to amass enough savings as fast as you can, so that — say — the age of 45, they can retire, or at least step away from the rat race. And then they hope the retirement savings they have amassed will last over the much-longer retirement span.

The third group are those, like me, who are forced early retirees. These retirees were planning to be in that first group, when all of a sudden, say at age 59, a job loss or illness, an unexpected retirement arrives sooner than they expected. If they are lucky, they will find that they have saved enough to make a forced early retirement work, with the right strategic moves.

If you review retirement videos on YouTube, or blogs on the blogosphere, you will see there are a lot of voices for those those planning a regular retirement, including those focused on the accumulation phase, and those focused on the de-accumulation phase.

There are many proponents for the FIRE movement, including some who are active savers and dreaming of FIRE, and others who have successfully started their planned early retirement.

But there are not as many voices to speak about the unexpected retirement, the forced early retirement. So in 2021, I began a YouTube channel "I was Retired" to share lessons learned in more than five years of managing a forced early retirement.

My retirement began at 4 p.m. on a Thursday afternoon, one month before my 59th birthday. Management was going to zig and I was going to zag. As I managed my retirement, I came to find that I was not alone.

In a 2021 Allianz Life Retirement Risk Readiness Study, more than two-thirds of retired respondents (68%) said they retired earlier than expected. That was up significantly from the 50% of respondents in the 2020 version of the study.

In the 2021 Allianz survey, most said they had to retire for reasons outside of their control. A third reported healthcare issues, which was up from about a quarter of the 2020 study . Another 23% reported unexpected job loss, down from 34% in 2020.

Forced early retirees face different challenges from regular retirees or those FIRE early retirees.

First, the abrupt start of your retirement creates its own challenges. Those planning for a retirement day in a traditional retirement sometimes have months and years to prepare. Those planning a FIRE future spend many years working toward that magic number when they can pull the trigger.

But those forced into an early retirement have only days and weeks to get things right. Do you have enough saved in all of your retirement accounts? Do you have enough work history to qualify for full Social Security benefit? When will you take Social Security? At 62, your full retirement age of 66 or 67, or will you delay until 70? When will you start a pension, if you qualify for one? Which of your retirement funds will you tap first?

Second, if you are suddenly retired, you will need to consider health care before Medicare. Those planning for a regular retirement usually time their transition to ensure they are eligible for Medicare. If you are on the FIRE path, you may already know how you will cover health care. But if you are forced into early retirement, you will need to consider how to manage through several years. And again, you will have only days or weeks to make some decisions. Will COBRA work or be too expensive? Will you be eligible for healthcare on the ACA marketplace? Does a spouse have a group plan that will cover you?

Finally, there is the emotional challenges of a decision forced upon you. I sometimes envy those who reach a planned retirement. That’s a decision I will never get to make. But I’ve discovered that it was the best decision I never made. And while I didn’t make the decision about when to start my retirement, I’ve learned to manage the many decisions that will make this retirement work. And just as I’m envious of friends who have announced their happy retirement, I’m sure there are some people who are envious that for the past five years, I’ve been able to say, “I was Retired!”

Through my YouTube channel and related blogs like this one, I plan to share some of the lessons I’ve learned in my first five years of my journey into an early retirement. If you are facing a similar unexpected retirement, I'm here to tell you it can be an unexpected opportunity to begin retirement, sooner than you expected.

If you are on YouTube, you can find me at https://www.youtube.com/c/IwasRetired

I've also posted this blog on blogger.com. You can find it at: https://jimsunexpectedretirement.blogspot.com/2022/01/three-kinds-of-retirees.html