No, We Don’t Need $1 Million to Retire

Come on, people.

$1,000,000.00.

Just look at that string of numbers with 2 commas.

Many people I know aspire to hit this string of numbers in their bank account before they retire.

• Yes, it feels good.
• Yes, it injects a sense of comfort knowing we have a pile of cash to lie our backs on.

And yes. It gives us a perceived sense of control over our lives. I can quit my job! It comes from my personal experience too.

Dad drummed it into me since young.

“Son, all you need to do is earn 1 million dollars, and you can stay home to play Street Fighter the entire day.”

Haduken the entire day? Really! I like that!

Dad still believed in the magical million today.

Trouble is…

I no longer do.

The Money-Retirement Game

How much money do we need to retire comfortably?

Many articles online suggest the following.

• A fixed-dollar amount like $1.6 million or some other number.
• A rule of thumb such as 10x your current annual salary by Age 67.
• A general recommendation such as saving 30% of our income in our 30s, 40% in our 40s, etc.

I like these articles.

They gave me a reference point when I was clueless. I was. Trust me. I knew nuts about retirement planning in my 20s and early 30s.

All I think about is…

Medical bills will chew away my lifetime fortune when I’m in my 50s. Thinking about that makes me sweat in my pants.

I better be prepared.

Over the years, I’ve realized that retirement is a complex topic, just like money. Or higher education. Or wealth distribution.

There aren’t straightforward answers.

In fact, the worst way to prepare for retirement is to connect a dollar sum to age, plus an assumption that we will do (absolutely) nothing.

If that is your idea of retirement and future planning — Do this.

• Write that idea onto a sheet of paper.
• Crush it when you are done.
• Toss it out of the window.

We must start afresh.

Here’s why.

1/ I Don’t Think Money Has Anything to Do with Our Retirement

Why should it?

Sure, our cash pile and cashable assets pay for our bills.

You know that. I get that. We all do.

But I argue that that line of thinking has nothing to do with retirement, per se.

Think about that for a moment.

We need money to pay our utilities, phone, and medical bills in our 20s, 30s, and 40s anyway.

It is not unique to retirement.

And this is the thing.

Life in our Golden Years is more than paying bills. It is about a life we desire when we can finally go to gear 2.

• We work a little, we snack a little.
• We workout a little, we walk a little.
• We help our children with their financial burdens when we can. We pay for our meals with friends as we can.

It is about our lifestyle choices.

That we can do what we want… without killing ourselves for money to finance what we love.

This article says it well.

“Try your hands at something new such as photography, Zumba, opera singing, learning a new language or ballroom dancing. Don’t be shy and assume that certain activities… are only for young people. Sign up for courses, meet fellow enthusiasts and indulge in new experiences…”

This sentiment has been echoed by many current active retirees I have interviewed.

You can read them here, here, and here.

2/ Age Has Nothing to Do with Retirement

Sam said it best.

“The point about becoming a retiring digital nomad is to live the life we want and finance our lifestyle. I’m 58. I like to be on the move. I must cover my travel expenses no matter how high or low. That is it, really.”

It used to be that we had an age for retirement.

• We study until 20.
• We remain in employment for the next 40 years.
• And then we start appreciating the sunset from 60 and onwards.

I know this to be the case. My Dad lived through this model.

And this model, put into motion since the 1950s, has experienced social stress fractures apparent to our generation (Full disclosure: I’m born in the 1980s).

• The fear of workplace age discrimination once we hit the Big 40.
• Age-based mental and mobility-based discrimination… when we reach the Big 50.
• Long-term employment converts to year-on-year renewal after the Big 60.

I’m sure you have seen this happening.

But times have moved on.

Now, we’ve got a choice.

Now, we can pursue opportunities during our after-hours. WiFi and laptops enabled us to become digital nomads in a Gig economy.

Today, we can divorce our labor from the cubicles if we choose to. It is a beautiful thing.

A laptop is what we need. But that is not the real trouble.

This is.

Do you know what you don’t mind working for during your Golden Years… if you must earn some money?

3/ The $1 Million Retirement Empty Talk

It makes sense to amass $1 million as the ticket to retirement…

… if you decide to stop doing anything during your Golden Years.

Of course. And that reflects the fundamental difference between income and expense.

• Income may stop.
• Expenses never end.

Sounds weird, right?

But that is the truth.

Active income will end when we stop working. That is the prime reason we own financial assets. They spit cash.

But expenses? They go 24/7.

• Can you stop eating? Nope.
• Can you stop commuting? I don’t think so. We are designed to move around.
• Can you halt all energy-related expenditures? I doubt. You require heating in winter and air-conditioning in summer.

Money allows us to survive.

So, that $1 million is a non-negotiable piece for someone pursuing conventional retirement. Such retirees spend their cash pile to keep going.

Nothing wrong there, of course.

But.

What if they delete their final dollar?

Well… you know the answer.

This, to me, is the real retirement issue, and it cannot be resolved by 1 million dollars.

Make it $1.5 million.

Push it to $2 million.

Or take $2.5 million.

The original problem remains, and it relates to the financial nature of income and expenses.

So, I think having $1 million for retirement is a red herring.

It’s good if we have it in our vaults.

It provides financial comfort.

But above all that, we must find ways to bring money into our pockets during our Golden Years.

• Think high-income skills.
• Think 1-person business.
• Think cashable assets.

They safeguard our retirement savings and generate cash flow.

The money itself doesn’t.

The Close

We are obsessed with the 7 digits.

We are. Having 7 digits in our net worth confers a special status in society. We made it. We are millionaires.

It applies to retirement, too.

Oh, we can finally retire with our money.

Yet, I think that is misguided thinking. Retirement is unbelievably complex. Money is one part of it, not all of it.

At the root of the Big R is us.

We must know what we want when we arrive in Retirement Rome.

No amount of money can help us with that.

Not even with $1,000,000 in the bank.

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.