Retirement, the one thing most of us all long for, also, the one thing that more and more people are going to struggle within the coming years.
The gap between the wealthy and the poor is getting larger and larger all the time. Soon, a lot more people are going to be working into their 70’s or even 80’s. Especially with all the advances we’re having in Medical care. We are extending our lives farther and farther into the future and most of us don’t have a solid plan of what we’re going to do when the time comes to retire.
When the time comes for you, what plans do you have in place to guide you into your later life? Will you run out of money? Are you sure? How do you know how long you’re going to live? I don’t know how long I’m going to live. So what can we do? How do you actually make a plan that will support you in to your future for an unknown amount of time?
These were the questions on my mind for a long time. How am I going to live when I retire? How am I going to be able to afford to live? How much money do I need to retire?
What does my retirement look like? Am I traveling? Or am I sitting at home doing nothing in front of the TV because I can’t afford to eat out at a restaurant once in a while?
There’s a lot of possibilities with those questions aren’t there? You should probably start thinking about your answers to them too.
Maybe you have a solid plan in place, you’re putting money away into Investments that should hopefully get you through but will they? Are you sure you will have enough money saved up to live your life? That was the kicker for me when I started looking into retirement planning. Will I actually have enough when I want to Retire?
Will my investments be enough for me to not have to worry about money ever again? Because I may be the longest-living person in the world, it isn’t very likely but it may happen.
Well, let’s go over what most people are taught and find out if it works for me and consider if it works for you.
Conventional retirement planning
Conventional Retirement Planning is what we are all taught by society. Now I say we are taught this by society because financial education in schools isn’t very good or thorough. They teach the same thing that society does to everyone just to a lesser extent.
Financial education in schools and most of society is virtually the same. Save up, live below your means, give your money like a good little sheep to a professional… they know better than you do.
And they very well may. But why is that stopping you from learning? How can you be sure your money is in a good place when you don’t know how any of your investments work?
Not just learning how it all works but learning the real risks involved with investing. The flash that we are sold on is that our money will grow by “X” percent per year and everything will be ok. There is some talk about risk but when you give your money to someone and hope they do the right thing. Your “low risk” investment just became a high-risk investment and you didn’t even know.
The high risk you take is this: Where the hell is your money???????
Do you even know where your money is? What is a Mutual Fund or Certificate of Deposit (CD) anyways?
For the little education we actually receive about finances in school if any, it will probably be something along these lines. Go to school graduate high school, go to college/university and get a degree, get a good-paying job with said degree(whenever that actually happens), work for years, live frugally, save as much as you can and then invest what you save into Stocks, Bonds, and Mutual Funds because they are “Safer” and have lower risk.
After all that, we are told then to pull from a government pension and retire free and happy as little sheep in our imagined future.
But there are some inherent problems with our imagined future. Those little sheep might be stuck in a pen waiting for slaughter and not even know it. While the whole time in the pen a farmer is shaving the wool off their backs and making money. How can you tell if you’re a sheep?
Let’s go back to a few of my questions on retirement and take a look at the picture that appears when you shave off the wool.
- How am I going to live when I retire?
- How am I going to be able to afford to live?
- How much money do I need to retire?
Will your investments be enough for you to not have to worry about money ever again?
How am I Going to Live When I Retire?
This can be a hard question for most people. The question isn’t so much about how really. The question you need to ask yourself is: What do you want in your retirement? What does the picture in your mind look like when you’re retired?
Is it Grey and Dismal, or Bright and Cheerful? Do you live in a house or an apartment? Big house? Little house? Do you have hobbies? Friends? Are you Playing and doing? Traveling and waiting? Living or just existing?
These are the questions you need to answer for yourself. Not all of our answers are going to be the same. The answers I have will be different from everyone else’s including you. You don’t need to follow how I think.
All I want is for you to QUESTION EVERYTHING and know what YOU want.
I want you to know what YOU need and what YOU see in your future because it will differ from me. That difference is what’s going to determine what you need to do for your retirement plans.
What I want is freedom.
Not the freedom that you may think when someone says freedom. I live in Canada I have freedoms. The Freedom to do and say what I want. Well… for the most part.
I want the freedom to do whatever I want, within legal reason of course, financially. In my own retirement, I don’t expect to be 90 and running around doing everything that a 20-year-old does. But, I sure as hell want to have the freedom to, if I so chose.
The freedom to do anything without worrying about how I am going to afford my home or any other priorities I have.
The freedom I’m talking about is financial freedom. The freedom to live and experience the world for everything it has to offer. The beaches, the water, mountains, people, animals, the sky and soul.
Each is an integral part of life’s enjoyment. You may not need to see the Mountains be happy but having the option is the freedom I want.
So, when we are taught by society how to achieve retirement, will it give you or me that option? That freedom to make your life what you want and to live it the way you want? And if it does, for how long?
When we are taught to go to school and get a degree to be able to get a great paying job. Well, this can be sound advice. But does it work for me? Not exactly.
My different experience
While I did go to school and graduated I did it differently than the normal stereotype, and I benefited greatly in doing so. I went to college through an apprenticeship to become a diesel mechanic. The technical name is truck and coach technician. This allows me to work on Transport Trucks, Trailers, Buses, Coaches, etc.
I started working on trucks when I was 16 and still in High School. So far it’s been great but do I want to be 65 years old and lifting 125 lbs brake drums or twisting and moving as I do right now? Will my body be able to endure years of doing this?
It’s going to be difficult to do what I do at 65. So where I’m at in my career has put me onto a timeline then hasn’t it.
Well so far going to school and getting a job has worked, but it has put me on a timeline. A timeline has to end at some point. So what if I don’t have enough money? This is a very real possibility and as I said before, this is something that is going to become a problem more and more as people age. It’s getting harder and harder to be able to retire and with people living longer, we are going to need even more money to do so. People will have to start working years longer to be able to afford to live during the retirement years.
All of these plans are under the assumption that we will be living in our home which is all paid off and our expenses will be lower. We will still have expenses though so money’s still leaving all the time, every month, week, the year we have less and less as we continue in our retirement. This is normal for most retirees.
All I see when I think about that is standing in a mud pit up to my ankles and every year I sink a little deeper and deeper into the cold abyss under my feet as the money flows out and nothing flows in. That doesn’t sound like the freedom I want for my retirement.
Am I Going to be Able to Afford to Live in My Retirement?
How do I get to the point of being able to retire? How are you doing it? The conventional way would be to save as much as you can and invest it into safe areas that it can grow and create lasting wealth. Sounds great but drawbacks are fighting us along the way.
How Much Money is Enough?
Right now the average recommended amount of income to save for retirement should be between 10 and 12 times your salary. So if your household income is $100,000 per year you should have between $1,000,000 and $1,200,000 by the time you retire.
Uh, that’s a lot of dough.
According to the GAO (Government Accountability Office), the average retirement savings for Americans between ages 45 and 64 is only $107,000. That’s a little light on the cash front in comparison to the $1M to $1.2M we are “supposed” to have.
Whereas the CIBC did a poll in 2018 that showed Canadians believe they need $756,000 to retire and 90% of Canadians don’t have a plan for getting through retirement.
That’s staggering! How is it that so many people aren’t prepared at all for retirement? How is it that so many people aren’t even thinking about what they’re going to do?
What’s The Biggest Problem With Conventional Retirement?
So you save your Entire life and Invest your money where you’re told. After all, the professional said it was a good spot to put your money and you paid him/her to say it.
Well, let’s assume everything works out. You have $1,000,000 and now you’re retired. Awesome!!!
How do you live? You have to pull money from your $1,000,000. Well, that sucks! You spent your entire life building that wealth just to have it dwindle year after year? What about your kids? Will there be money for them? I guess that depends on how long you live. That seems morbid and I’m sorry but, it’s becoming a reality of life.
The cost of living is going up and even the gains on $1,000,000 every year may not be enough to live on. Besides, to receive some of those gains, you have to sell your investment.
I want there to be Money for my kids. I want my kids to have a better life if you will, to have something when I’m gone. The age-old saying, “I want you to have more than I did.” Well having no choice but to spend it doesn’t seem like a good way to ensure that.
Living Off The Principle
This is how most people make it through Retirement. Save their entire lives to spend it all in a few short years. That’s if they’re lucky and have enough. If they started soon enough and saved enough.
I’d rather have money coming in when I retire. An income I can live off of without having to touch the base amount, the principle. “live off the interest” if you will.
Creating enough Wealth to do that starts with understanding Compound Investing.
So, what does an income during retirement look like? How can you achieve that?
Using Dividends can be a strategy to achieve this income during retirement. Dividends are monetary payments made to the shareholder of a company. Normally these payments will occur between 1 and 6 times a year.
Having Dividend-paying assets can be a great way to create wealth while in your retirement. But there is a downside as well.
The only way to make significant dividends is to have a significant amount of money into dividend-paying stocks. Also, these stocks need to have a high yield. The Dividend yield is a percentage amount paid to shareholders based on share value.
So if you have $1,000,000 in Dividend-paying stocks paying at a 5% yield you would be making $50,000 a year in Dividends.
That’s a good chunk of income to be retiring on and it’s 100% passive. You don’t have to go to work every day to make that $50,000. You just have to invest a lot of money……. That’s the hard part.
Huh. What else could provide a better value and cash flow for income in retirement?
Owning Real Estate can create a huge amount of wealth. There are a lot of Millionaires being made every day through Real Estate. Buying Real Estate isn’t as passive as Dividends though. You will have tenants, repairs and potential problems.
That’s not all bad though, a lot of people want a part-time job when they retire. They don’t want to be stuck at home. This could provide that avenue as well as income.
There are some better things about real estate too. You get to use other people’s money (Leverage). It can be very favorable come tax time. Having write-offs can make a big difference when it comes time to pay the taxman.
It may not require you to have as much capital.
As I said, you can invest other people’s money. By using the bank money if you need a 20% down payment you leverage (borrow) the other 80%. This, in turn, means you can have $1,000,000 in property and it will cost you $200,000 down plus the maintenance funds in reserve, lawyer fees, etc.
The kicker about Real Estate, $1,000,000 in property can be generating roughly $50,000 a year as well. And to have $1,000,000 in properties, you won’t need to have $1,000,000 because of leverage.
Having a mixture of Real Estate and stocks can be great as well but, how can you fund that much money?
You may not think that having a business in your retirement would be a good idea. You aren’t looking to work you want to spend time with the family and not have to work. You spent your life working, why start a business now?
You don’t always have to be the front line staff in a business. Managers are just that, they manage your business for you. You can own businesses and place the correct people into them thereby making it so you don’t have to run all the details yourself.
There is a big difference between “Self-Employed” and “Business Owner.” A Self-Employed individual owns his/her job, if they stop working the money stops flowing.
A Business Owner can do what he or she wants and have minimal time working IN the business. Business Owners work ON businesses, not IN businesses.
The amount of income you can make from a business is an untold number.
Successful businesses can make you more money than your 9-5 and require less work on your part or it may not produce adequate income to live off of solely. This depends on the business and how efficiently it is run.
Having a business in retirement won’t be for everyone and may not produce enough to live off but it can help supplement the income required throughout the year. Even a hobby business, a “Side Hustle,” can have big results. So don’t count it out.
To Retire and have the freedom that I want, I know that I’m going to need multiple revenues. The majority of people only have 1 maybe 2 sources of income, a salary and a few investments (maybe). Don’t you think it would help if you could have more than that?
Wouldn’t it be better to have multiple streams of income going into retirement so that you never have to touch your principal investments? This is the difference between my retirement and most people’s.
I want my income to continue through retirement. I’m going to create multiple income streams (Cash Flow) that I can use while sitting on a beach drinking my Metamucil, Multiple streams of income that go beyond working the 9-5 anymore. Streams that can fuel a retirement no matter how long I’m around and no matter what I want to do with my time.
What plans do you have in place for your retirement?
Learning to PROPERLY make a Goal is the key that will lead to you successfully meeting YOUR goals!
Let me know what you have planned for retirement, I’d love to hear what you think!!!