What is retirement?
Retirement, as defined by us here at Retirement Nut, is the state of being that does not require the obligation of working full-time. Like all great plays there will be a second act, and this act should be enthralling and riveting. Retirement is not an end all be all in which we work to not work. This second act of retirement should be under one’s own terms and be enjoyable and pleasurable, though some part time occupation may be required to meet lofty living standards. This second stage can be reached by various means and can occur at any age depending on your proper planning and allocation.
Retirement, defined by merriam webster and popularized by our modern culture is defined as “a withdrawal from one’s position or occupation or from active working life.” Though this is a robust answer, it fails quantify or justify what it takes to withdraw from active working life, what constitutes success during this period and how one attains this lifestyle. In addition, it makes retirement seem binary, and trust me if you merely retire and sit on the couch you will do just that and whither away.
In the recent century, retirement has come about due to the prolonged life expectancy. While retirement did occur in cultures before ours, it was restricted to the extremely wealthy who’s occupation in general was one of leisure. For example – take a large landowner in ancient times… They never used manual labor to profit from their land, they used others labor to profit. So in essence, the planning and allocation referenced above took place generations before. Unfortunately for those not blessed with a large dowry, they worked from dawn until dusk, and work from birth to death was required. Today, we live a long time with the hope of someday no longer working. We should take full advantage of the abilities we have to be the “landowners” (shareholders) of today and watch our money work so we no longer have to.
Popularized by the Social Security Check in America, retirement age begins in early to mid 60’s. Originally, this was instituted to help the elderly whom were devastated by the Great Depression. It has forced Americans to save part of their check for generations, to one day recoup those savings. Though, with the significant advances in money management and access to information, we are seeing a subset of the population retire on their own terms much earlier than the age of 60 without the help of social security. Simultaneously, we are seeing a large portion of the population not preparing for this period of their lives, which is leading to an eventual over extension of social security. No matter what political camp you reside in, the social security you are paying in today is being paid out to those receipts now, not saved for the future, resulting in an unknown future for this government backed item.
How to achieve retirement
Retirement takes precise planning and understanding that investing in the right thing is more valuable than just investing blindly. Seems simple, right? By educating yourself now about different investment options there are, means that the results will be shown in a larger nest egg in the future. For example, do you know that inflation occurs at 3% annually? This means that the dollars you save today are less valuable (in simpler terms – you’re unable to buy the same amount of things) next year. Once you understand these concepts, you can allocate a certain portion of your income to prepare properly and for a (hopefully) early retirement.
Some pundits argue that a change of lifestyle is necessary for those to save a larger portion of their income. This should sometimes play a role but, oftentimes, it is the return of the dollars invested that are more important than the addition of substantially more dollars.
We will cover all of these challenging pieces of the puzzle in depth throughout our website.
How to invest for retirement
As you prepare for the day that seems a lifetime away, the decisions you make today truly define the future outcomes. As philosophical as that sounds, the reality is where you choose to put your money today is as important as where you choose not to put your money (think investment is house link). Understanding the basics, being educated about fees and proper returns will ensure that you can enjoy the latter part of your life, without working a 9 to 5 when your 65.
Retire on your own terms
At the end of the day, we see it all the time, the friend that retires and takes the second job to support themselves. The mentor who worked for years and passed away before that retirement day appeared. The list of sad stories rings on and on, but this is the chance where you can change that and retire on your own terms.
Photo by Reinhard Link