Welcome back! Wow, did you see that picture of my kiddo in the last week’s post? That boy is awesome! I can’t wait to retire and spend every day teaching him, watching him grow, and experiencing whatever life has in store for us.
Wait, retire? Isn’t the word retirement only used for old people? Heck no. Not anymore.
You’ve come to the right place if your idea of retirement includes a walker with tennis balls for feet or playing bingo at the old-folks home.
If you’re going to start kicking some financial ass, we’re going to have to change your definition of retirement right here.
Ready. Set. Go!
Retirement isn’t for those over 59 1/2. It’s not for those over 65. There’s no age for retirement. It doesn’t happen when you’re no longer physically able to work. It’s not boring. You don’t stop dreaming or aspiring. Better yet, you’re not going to fall over dead shortly after retirement!
Get rid of those assumptions about retirement and you’ll be on the right track. Better yet, you’ll change your life. Seriously, do you really want to work until 65?
Retirement is when you’ve checked two boxes. Box one: You have enough money invested and no longer have a need for additional savings. Box two: The combination of your investment returns and any additional income are greater than your living expenses.
What does that look like? You know, with numbers and stuff?
We’ve discussed the 4% rule in past articles, so we’ll use that. Let’s say you need $50,000 annually to live a lifestyle that you’re happy with. Using $50,000, there’s two ways to find out how much money you need to retire.
- $50,000 / .04 = $1,250,000
- $50,000 x 25 = $1,250,000
Simply replace $50,000 with your living expenses and you’ll come up with your retirement number.
One and a quarter million dollars is a lot of money! Don’t fret.
Keep in mind that any income you make once you retire will chisel away at your required investment returns. Therefore, if you earn $1,000 a month selling mittens for kittens on Etsy, your annual requirement drops from $50,000 to $38,000. I’ll leave the math to you.
Now that you’ve realized that you can put your nose to the grindstone for 10 years or less and retire, you’re probably wondering what you’ll do with all that free time. We’ll talk about that later. For now, check out the short answer in bold above.