If you could work reasonably hard for 2 more years and then retire with very little in retirement savings, would you?

I asked this question on my Facebook fan page recently and got some interesting responses. The responses seemed to vary depending on what the definition of retirement was for the person answering.

What would your answer be?

That question came up because I realized that if we do meet our goal of having our house paid off in two more years, then our expenses would be so low that we probably could technically retire at that time. (Or at least one of us could.) But…we’d have very little in retirement savings, so it would have to be a non-traditional retirement.

By “retire” I mean that we wouldn’t both have to work our full time jobs in order to pay our minimum monthly expenses. We could probably get by with a part time job, if it provided health insurance.

If we did “retire”, my intention would be to keep working on my business (because I love it) and to begin volunteering a good deal of hours each work. For me, retirement would mean the freedom to just work on the things I wanted to work on, when I wanted to work on them. (While traveling around and seeing random things, of course — which might require some creativity.)

So I suspect my answer to that question would be yes, IF we could get health insurance. What about you? How do you see retirement?

The basics of opening an IRA are simple in theory:

1. Decide which type of IRA you want and qualify for (Traditional or Roth, if any)
2. Choose a trustee
3. Fill out some application forms
4. Choose what you want to invest/save your money in
5. Start sending money in — up to the applicable contribution limit or what works best in your situation.

In practice though, there’s a little more to it than that. In fact it’s common to be confused about just what an IRA is exactly.

Let’s start with what an IRA is NOT: An IRA is not stocks, mutual funds, index funds, real estate, money market funds, CDs, or cash. It’s not any sort of investment type at all.

And now for what an IRA IS: An IRA is a way of characterizing your retirement savings. IRA stands for Individual Retirement Arrangement, and Publication 590 from the IRS goes into great detail about the nitty gritty.

I like to think of an IRA as being like a big pot on the stove, with the investments I choose to put into my IRA as the ingredients in the pot that simmer over time.

You want to use a good pot — often a brokerage firm, investment firm, or bank — that has low or no maintenance fees (and low trading commissions, if you’ll be buying shares of stocks or mutual funds) and is reputable. Do your research to be sure you understand what you’ll be charged and what investment options are available.

You also want to choose good investments. These investment “ingredients” could be stocks, mutual funds, real estate, etc. (There are some restrictions on what your IRA can be invested in, and if you invest in real estate there are special considerations.)

If you qualify, an IRA can be an important part of funding retirement.

If retirement seems like a distant, not-very-pressing event, chances are you haven’t given a whole lot of thought to what you’ll actually do when you’re retired.

But the kinds of things you hope to do during retirement will impact your planning.

So, what do you want to do? Work as a greeter? Volunteer at the art museum? Lounge on the beach? Travel the world? Or something else? And what kinds of things would your spouse like to do, if you are married?

Keep in mind that not only will the kinds of things you want to do in retirement impact your planning, how you hope to carry out those plans will too. For example, if you want to travel the world, you could do so by working on organic farms, or by staying at 5-star resorts, and the costs would vary significantly.

If you have no idea of what you might like to do during retirement, start by thinking of the kinds of things you like to do now. You might also try out some of the things that you believe might interest you on a smaller scale — volunteer a few times a month somewhere, take a small trip, get a part time job at a coffee shop, etc — to see how you like them.

Once you have a better idea of the kinds of things you might enjoy doing, you can begin to plan accordingly. I intend to plan for both a minimal retirement and our dream retirement (once we figure out what that might be). That way we’ll have a better idea of what to set as goals.