I had a thirty-year-old client make a comment to me recently about retirement. She said it was too far off to think clearly about it and made it a point to say it is 30 years from now.
This really stuck with me and I am have been thinking about it ever since. It made me curious because I talk a lot about mindsets and why people believe what they believe and when she made those comments, I thought to myself….
• Why is it that she believes it is 30+ years off.
• Why that particular point in time.
I think it is simply because it is the status quo. It is when social security becomes available. It is a time when most people think they are to retire. It is what we are told retirement age is.
The truth is, I hear from far too many people who reference social security eligibility with when they can retire. I really want to help you avoid this line of thinking that you have to be 62 or 65 to retire.
The only reason you would focus on this is if you have few income sources outside of what the government is offering and have to follow eligibility rules around those benefits.
But with proper planning it doesn’t have to be this way. You can build assets and not have to rely 100% on social security. It can be part of your long-term income strategy but my hope is that your not relying on it before you can retire.
So, this prompted me to want to share my thought on why retirement is not an age and explain how it is all about how you think.
The status quo tells us to work and save for 40 years, then retire. It’s what our parents did and perhaps their parents did before them.
But there are some serious problems with this approach. We are living much longer. Life expectancy when social security began was 58, now it is mid 80’s and with medical advances we are seeing more and more people living beyond 100.
And just like pensions; social security seems less and less viable as we go from one generation to the next. The resources for these types of plans are dwindling leaving more responsibility on each one of us to come up with a better plan than our parents had.
This problem is only compounded by many of the financial entertainers who are still promoting one-size fits all ideas and investment professionals continuing to recommend antiquated investment strategies that leave you with fingers crossed in hopes of the best outcome. It is a flawed and broken approach.
So, we have to do things differently, we have to think differently about money and we have to be deliberate in our decisions.
So with that, it may help to define what retirement is.
Retirement is a point in time when you have sufficient cashflow from your assets to support your lifestyle. In other words, you have assets producing income that can replace your need to produce income through a job.
This can happen at 35 as easily as it can happen at 65 it is just a matter of planning and doing what it takes to make it happen.
The age of when this happens is not important. Rather, it is a matter of how quickly you can reach this point.
It is about giving yourself enough time to get your income assets developed and producing the level income you need.
If you are 35 and want to retire when your 45, well…that is going to take commitment and doing things differently than what many people are doing. This could be 10 years or it could be 20 years, but I can say one thing for sure, it is not going to happen by putting 5% of your income into a 401k.
The truth of the matter is, the wealthy already understand this principle and they focus on creating assets that produce income. This allows them to retire at an earlier age, which enables them to work on wealth creation opportunities, or other interests they have for themself.
So, how do you do this?
Well, this can be accomplished in a few ways but the first step is to see the big picture of what is happening, which is what we are trying to do through this article.
Now, we know that most people were not born with a silver spoon, which means it will be necessary to live below your means to allow you the ability to accumulate money for purchasing income-generating assets.
So, we have to get our thinking straight and begin accumulating money and building resources to ultimately acquire income-producing assets. It is a process and takes careful planning but it is possible with the right strategy and way of thinking.
Now, it is important to bring to light that you should not consider mutual funds, stocks and bonds as a means of creating income. There is too much volatility involved with using these types of programs, which cannot effectively feed your need for income or be reliable enough to be there when you need it due to market fluctuation.
Another thing to understand is that funding a 401k or other government retirement program ties the money up until you are 60… so this will not work if our goal is to retire at a young age.
You have to think differently and challenge the status quo if you want something better for yourself.
So, we have to use non-qualified programs that have no age restriction and allows for access to your money on your terms. This gives you control to access money to acquire your income producing assets.
So, the first stage to this would be developing a savings strategy until you have accumulated enough seed money that will enable you to acquire your income assets.
This would mean using carefully managed accounts or specially designed life insurance programs. A bank account or money market does not offer much of a return and most other investments carry too much risk. So, we have to be selective with how we go about doing this.
Then once you have accumulated enough money in these accounts, you can begin to put your income producing asset strategy into action.
This does not happen over night for sure but understanding this and being committed to a plan are the keys to making this happen for yourself.
Again, all of this boils down to how soon you want to be able to retire and live entirely on passive income.
You have control over the compression or extension of the timeline and is why I emphasize that age has nothing to do with retirement.
This is something to truly get excited about! This is an opportunity to actually live life on your terms. All you have to do is get a plan put in place and follow the plan to fruition.
Need help with a plan, shoot me an email at yourmoney @sfgplan.com and we can discuss your situation.
The above summary has been obtained from sources we believe to be reliable, but we cannot guarantee its accuracy or completeness. Past performance is no guarantee of future results.