If there’s one word that I think should be erased from existence, it’s retirement. Retirement is defined in the dictionary as “the act of ending your working or professional career: the act of retiring.” The word “ending” simply doesn’t sit well with me nor does this perception of our careers and investments being based on that crucial retirement age. We are made to believe that our entire working lives are for us to up for the time we don’t have to work. A time when we’re supposed to kick back and relax. But is that really what all of us want? To just stop? The times in our lives when we feel most wanted, desired, and useful is often when we’re working or at least when we’re active. It’s no wonder that a huge majority of retirees have reported that they are bored in retirement. And it’s also no surprise that a large portion of retirees wind up taking some sort of part time work after their careers are over. Some say it’s because of money but you’d be surprised at how many do it because they just want to get back into the mix. But let’s get back to the dreaded word “retirement.” Here’s what 99% of media outlets push to the public when it comes to retirement.
You must save X for your retirement. You have to do this, that, and the other in order to have a comfortable retirement. They’ll tout formulas and tell you that if you have this much money going into this fund earning this much of an annual return then here’s how much you’ll have for retirement. They’ll tell you that you have to have X times your annual salary to survive your retirement lives. It’s all designed to be some set goal that we’re all trying to shoot for. The problem is that we’re shooting for the “end.”
The truth is, if I were to retire in the traditional sense of the word AKA not have anything to do anymore, I would probably lose my mind. But maybe that’s just me. Warren Buffett claims he “retired” before the age of 40. But did he really retire? Of course not. He simply closed down his partnerships to focus on working for himself and his own interests. But Buffett never stopped doing what he loved and chances are he never will. If you want to redefine retirement how about calling it “doing what you love full-time?” If doing what you love is working, then shouldn’t a person have that right?
There’s a reason Buffet’s in his 80s, still kicking, and still doing what he does best. Buffett’s career gave him purpose, direction, and fulfillment. Why take that away? Here’s another alternative definition for retirement: the option not to work anymore. Isn’t that more fitting? It takes a whole heap of pressure off the notion that there’s this inevitable day when work ends and you have to have the financial means to survive until you are dead. Sounds pretty morbid to me. I’d rather have a life doing something that makes me happy until the day I die. So when you’re out there making money and thinking of your future, do not think of retirement. Think of things that you might actually like doing. But what about the financial aspects that everyone worries about so much? Here’s what I say to that:
Stop thinking about retirement and start thinking about income, period
What’s the best hedge against losing a job? Money right? Of course. If you somehow lost your career you need to have enough funds to cover yourself while you find another job to pay the bills. But what if the entire time you’ve been working (from a very young age) you were in the mindset that every single dollar you put away could lead to an increase in your monthly income? In fact so much so that after enough time you could earn more per month that your current job pays you? The problem with many folks is that they’re in the mentality of having to save up this huge sum so they can live off said sum for the rest of their lives. If you simply shift that mindset to “income” you’re going to be way better off.
Put it this way. If you knew that 50K a year would suffice in retirement and your mentality was such that you did everything possible to earn that 50K “passively,” by the time you were earning that 50K your principal would be well into the millions (assuming you were earning that 50K from investments and not a side job or real estate venture or book deal, etc etc).
And you can also get super conservative with this. Personally I assume a 3% rate on my money which is extremely low compared to conventional standards (which are more like 5-9%). So I know that every single time I’m able to put away around $4,000 I get an extra $10 a month in income. It makes my goals easier to attain. I’m always in the mindset of “4 Grand, 4 Grand, 4 Grand.” Each time I put that away I’m making another $10 a month. That may sound like a little but if I do that 5 times, I pay for my gym membership. I do that 10 times? Then we’re talking a phone bill. 20 times? Utilities. And so on and so forth. So each milestone you hit, all of a sudden you’re paying off expenses that you’ll never have to pay for again. Bottom line? Get in the income mentality, not the “I need a huge principle to live off of” mentality.
How do you do this? Simply. Invest in a low cost index fund or mutual fund and do nothing. Want to hear more about it? Read about the only investment you’ll need for retirement.