Most people associate retirement with money and want to retire rich. And I can’t blame them. Before I embarked on my journey to early retirement, I used to think that in order for someone to retire, they must have certain amount of money or else their retirement will stink. Back then, the rat race through life was all about retiring rich, all about this coveted life that’s supposed to come one day in the future. Questions about retiring rich and how to achieve that goal seemed perfectly valid, but it only lasted until I realized the importance of asking the right questions. “How Much Money Do I Need to Retire” is a fundamentally wrong question because as most wrong questions it implies that possession of something (in this case “money”) is necessary in order to retire. But that’s something I have already covered in my How Much Money Do I Need to Retire Early article. So why am I coming back to the same topic you ask? Because I believe it is important to realize that retiring rich should not be the goal, otherwise it will lead to the rat race. Hunt for the riches can cost you a lot of time, the commodity you only have the limited supply of. If you waste your time trying to get rich, trying to achieve a goal that you believe will bring benefits in the future, by the time you are a baby boomer you will be so short on the time left, that even if you have accumulated riches, you will have little time to enjoy them to the fullest. And that doesn’t even take into account worsened health you will have developed by the time you have reached that age.
Retiring rich should not be the goal, retiring soon, preferably now should be. If you make retiring rich your goal, you will set yourself on a long path using the best years of your life working like a slave. Whereas if you make retiring now your goal, you will look towards the ways to establishing a cashflow that will set you free from shackles of corporate slavery and send you on your way to enjoy life.
Forbes Magazine has a list of Rich People. According to their definition, a rich person is someone with annual income of at least $1 Million. This is Forbes’ definition of “Rich” – their understanding of “Rich” has everything to do with the amount of money. My definition of “Rich” would be vastly different as what Forbes considers rich people are simply people with a lot of money to me. Just because they have heaps of money, it doesn’t necessarily mean they live rich and fulfilling lives. But that’s not the point at this time.
Given Forbes’ definition of rich, if you wanted to retire rich, you would be aiming at gathering at least one million dollars before you retire. If you happen to score a good paying job, let’s say one that pays $60,000 a year, you might be able to put away $2,500 each month towards your goal of retiring rich. If everything goes without obstacles and you remain diligent and never fail at putting away $2,500 a month, it will take you 33 years and 4 months to reach your goal and retire rich.
Now – if you take into account that you won’t score a job that pays $60,000 a year right off the college, you may not be able to start with such savings until let’s say – the age of 27. This means that my the time you have saved enough to retire rich, you will have been 60 year old. Great – you’re an old vegetable. How does it feel to retire rich?
Why would you want to make retiring rich your goal? It could condemn you to lifetime of servitude as corporate slave, wasting the best years of your life in a cubicle or wherever your workplace may be so you can have the retirement you desire when you are 60? Let me remind you of the fact that to live it up as though you have retired rich, you do not need much money in your bank account. As matter of fact, you don’t need any money in your bank account and still be able to embark on a journey of a lifetime. What do I base such bold statement on? I base it on a fact that I personally know a guy who retired in his 30’s just like that – myself.
Not only did I not have any money when I retired, I was actually $30,000 plus interest in debt. Yet I’ve wasted no time and set out on my merry way to early retirement and never looked back. How could I do that? Cashflow and belief that I can do it. That is all you need to retire young. Or simply retire at any age. If I could do it, anyone can. Get rid of the notion that you need money in order to retire and quit focusing on the size of your bank account. Because if you keep asking yourself how much money you need to retire, you will be putting your retirement off into the future. And what you put off once, will be put off again. There will always be obstacles, challenges and changes in your life. At one point it will be more money that you need to retire, then completion of the project you are working on, then fill in the blank. If you see it in the future, it will always be in the future. Future is the destination, but that’s not where happiness lies. Happiness is the journey.
Let me recapitulate again why the idea of working yourself to exhaustion so you can save enough money to retire rich is a silly one and why working to save money for the future is a fundamental loss:
- Being employed provides you with security of a steady paycheck, but at the same time it is the type of income that’s taxed more than anything else and offers little control over how big a chunk of your hard earned money is taken off as tax
- Going to work requires dedication of your time to job tasks and time is the most precious commodity you have
- Employment doesn’t come with significant fluctuation of money earned. In order to earn more, you’d have to either work more (take overtimes or second job) or work harder
- Employment has little or no residual value. You get paid for work performed and/or time spent at the workplace. In order to get paid again, you need to do work and/or spend time at the workplace again
Does the idea of spending your whole life being a corporate slave with the goal that one day you may retire rich still sound appealing to you? Being an employee is to be the most underprivileged member of society. You will be taxed near 50% of your income and you will only have the after-tax left overs to pay your rent with. But the worst thing is that you will spend the days of your life while you are able bodied doing anything but what you want to do. Days you have only so many of before your time is up. If you are going to invest it towards securing your retirement, don’t do it with the goal of retiring rich. Invest it into getting some cashflow happening for yourself so you can retire now, whatever your age and start spending your precious time doing things that matter to you, things that excite you, things that fulfil you. This way, when your time comes and Grim Reaper knocks at your door to end your journey on Earth, you will feel rich. Not Forbes rich, but content with the way you have led your life. You’ll leave this world happy and fulfilled.