Contrary to popular belief, retirement is more of a dollar amount than it is an age-based milestone.
What I mean by this is that as a society, we have a partially inaccurate view of what I believe retirement truly looks like.
Do you know why we traditionally view retirement as age 65?
Because in 1935, the Social Security program was created and it outlined specific rules & requirements for aging workers, with one of them being that workers would receive their full Social Security payouts after reaching age 65.
And they’re pushing the number farther back over time as life expectancies increase. The current retirement age is now 67(!) for those born after 1960.
So to begin reframing what retirement looks like, let’s first define the term:
To “retire” is to stop doing something, or to withdraw yourself from something.
You can “retire” a bad habit.
You can “retire” from your 9-5 that you hate, and still work as a freelancer afterward.
You can “retire” from a constant content cadence and fall back into a more structured, episodic series.
Traditionally, retirement is viewed as the act of withdrawing yourself from the workforce.
However, I believe that retirement can be viewed as a period of time in your life where your use of capital - time, money, energy, and attention - is best aligned with your desires.
Too often we fall victim to the mindset of “if I keep doing this a little longer, I’ll finally be able to quit my job and live the life I’m dreaming of”.
Truth is, complacency and comfortability sets in by the day, making it that much more difficult to pursue what you truly want.
Which is why I think as creatives, we’re well-positioned to build a career that we don’t need to completely “retire” from.
We can retire from the 12 hour days and constant creation at some point, but we may never want to retire from the craft itself.
It’s hard to step away from something that you’re truly passionate about.
Ultimately, what I believe we should be chasing is flexibility and optionality, not an arbitrary age formed around outdated regulations.
There are many ways to increase your financial flexibility so with that, here are a few steps to beginning planning YOUR retirement:
Before diving into tactics and strategies, take some time to think about what retirement means to you.
For example, I personally enjoy designing and creating and believe that my "retirement" will still consist of those two things in some capacity.
So I'm trying to build a financial foundation around me that will allow me to do those two things without worrying about the financial benefits from doing so.
I also want to travel whenever I want so as long as I can design, create, and travel without being pressed for income, I would consider myself "retired".
Going back to the first sentence of this article “retirement is a dollar amount” - this step is where you begin to figure out what that dollar amount looks like.
This can be done by evaluating:
And then comparing them with where you want to be at retirement.
Those numbers will then give you a starting point that allow you to begin designing a financial plan.
Do you need to have $1,000,000 invested and $20,000 of recurring annual revenue to live out your dream life?
Or maybe $3,000,000 invested so then there's no need for secondary income?
There's no right answer, only what's right for you and your life.
Here's a "fun" calculator to play with that shows how long investments will last based on how much you spend: Investment Withdrawal Calculator
After determining your personal numbers, you can then start creating a plan with action items & strategies to reach those goals.
For example, if your goal was to have $2,000,000 saved because it would provide you with enough income to live the life you want, you would need to:
You can only begin planning and taking the right actions after you've figured out what you're working towards.
As much as I deeply love making things as simple as possible, with retirement/income planning, it carries a minimum level of complexity no matter what.
For example, you may be familiar with the 4% rule - which states that someone can withdraw 4% of their investments each year to live off of and not run out of money.
So if you had $1,000,000 and followed the 4% rule, you could withdraw $40,000 each year and not worry about it.
However, a term that you not be familiar with is "sequence of returns risk".
The negative side of this little phrase can cause retirees to go broke and FIRE-seekers to hit the dreaded workforce again.
When you retire in the traditional sense, you're transitioning away from employment and regular income, which means you typically have to live off of your investment portfolio. I always preach that you shouldn't focus on stock market performance but when you're planning to live off your investments, you have to.
And a couple of bad years in a row at the beginning of retirement can be detrimental..
For example (below), both investors retire with $1,000,000. At the beginning of retirement, the market goes down 15%.
Investor #1 is only withdrawing 2% of their portfolio while investor #2 is withdrawing a full 4%.
It takes investor #2 almost 17 more years to recover because they were withdrawing twice as much money when the value of their investments went down. Then when the markets went back up, they had less money to work with.
There are a lot of different ways to prepare and plan around sequence of returns risk, but it needs to be accounted for.
Much of the financial education content I've come across doesn't go deeper than surface-level listicles and I don't like getting too far into the weeds with things like this because I know it's boring, but it can be valuable if you haven't seen it explained before.
(If you enjoy this kind of content, please let me know. I'll gladly write more of it!)
I also know that planning for retirement or financial independence can be confusing and time consuming, so if you ever decide that you might want to work with a financial professional, I created a quick free guide:
Download (no email required): 7 Questions to Ask When Meeting With a Financial Planner
Also read: How much does a financial planner cost?
Let me know: what does retirement looks like to you?
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