The Way Most People Think About Retirement Is Wrong
Retirement is not the same for everyone
When most people think about retirement, they think of the mythical year of 65 where retirement is supposed to be a guarantee and life is suddenly supposed to get easier.
Go to school, get a degree, work for 40 years, and then after all of that…retire and live the life of your dreams.
That’s how retirement is sold to many people, but this depiction of retirement is far from the truth. A variety of falsehoods exist within the retirement narrative, and understanding the falsehoods can help you retire on your terms.
Retirement Is Not A Number
65 isn’t the year everyone gets to retire. Some people work into their 70s…and not always because they love their jobs. The bills still have to get paid and food still has to end up on the table.
With people living longer on average than they did a few decades ago, you’ll be alive longer to burn through more of your nest egg. That means each person’s nest egg will need more mileage. Combine that with gradual annual inflation growth and the heightened cost of living associated with inflation, we’ll likely need more money than we thought.
It’s for this reason that some people work until they die. Their nest egg is never big enough to afford the lifestyle. However, some people also use this truth to retire much sooner than 65.
Retirement Is About Cashflow
Retirement is just basic math. If you produce cashflow from your investments that exceeds your living expenses, you’re set.
If you want to live a more expensive dream lifestyle that may include things like more vacation time, you’ll have to generate the corresponding cashflow from your investments to fund those dreams.
You don’t get what you want from retirement just by wishing it so. You get what you want with the proper cashflow. The only exception to this rule is spending additional time with family because you’ll have a lot of time to do that.
This is how people retire in their 40s. They make a lot of money, invest almost all of it as they get it, keep their expenses as low as possible, and end up with a solid nest egg that produces cashflow.
Don’t Stop Working
While this may sound counterintuitive to the retirement formula, you should never stop working. The work you do gives you a sense of purpose, and no longer working can actually result in a deterioration of life (i.e. intense boredom in between occasional vacations and other exciting moments).
Making enough cashflow to pay off your living expenses and a little extra isn’t the signal to stop working forever. Instead, it’s the signal to become more selective of the work you do.
Don’t like your job? Leave now that you’re making sufficient cashflow. But find some work that you do enjoy and doesn’t take up too much time. This will ensure you’re still surrounded by a community whether through a workspace or an online platform like this one.
The best case scenario is to get a location independent job and act as your own boss. You get to call the shots and decide if you want to take an entire week off because you want to spend more time with your family or go on a cool vacation.
You also get to decide if you want to work a 10 hour day just because you feel like it. I don’t know how many people want a 10 hour day after their retirement, but if you’re by yourself the entire day and you love your work, it might cross your mind.
Despite the retirement path’s depiction as a cookie cutter formula that applies to all of us, it’s anything but that. Each person retires differently based on previous decisions they made and how they envision their post-retirement lives.
We need a better understanding of our individual formulas than the outdated one society gives us. Only then can we retire happily later down the road.