Sunday, January 6, 2008

What Kind of Retirement Are You Planning?

Retirement, especially an early one, is a dream many of us are chasing. And there are many opinions on how to achieve that dream. There are claims, counter-claims, esoteric math, fancy calculators, quizzes and questionnaires that will help you plan your golden years. As I dabbled with these retirement conundrums – I wondered what kinds of retirement options I have. I think at least three …

No Work & No Play
This option implies everything remains the same – only I don’t have to work. In other words my income and expenses remain the same – I just find a new source of income which frees me up from slogging 8-5 everyday for the next 20 years. This is the favorite retirement option for folks tired of their jobs.

How do you make it happen? I guess by changing your income stream. That entails

    The lucky ticket
    No work No play
  • Lottery tickets and Las Vegas: Easy but highly improbable.
  • Passive income from real estate: Has been done and has merit. Although the option entails understanding the real estate market, building contacts, investing time and money to create this income stream.
  • Investment income: You need a lot of moolah before the interest and earnings starts to match your income stream but it is possible.
  • Silent business partner: Viable option if you invest in finding the right business and keep up with the business operations.
  • Side business: A side business may create some extra income and but to replace your primary income the business may need be well established and profitable. That usually means a full-time business. And running a full time business is a full time job and that may be not what you had in mind.

No Work & All Play
This is the typical definition of the golden years. You kick back and change your lifestyle. Travel the world, move to Thailand for a few years, winters in Australia, summers in Spain, golf, spa …

And long walks
It’s harder to plan this retirement because your lifestyle is loosely defined and so is the cost. Are you really a world traveler or after 2 trips you are done? Golf and spa – fine on the weekend but everyday? And then the cost – where, when, for how long – a lot of unknowns means uncertainty about the income requirements.

How do you make it happen? You start by finalizing your true after retirement lifestyle. Once you know how you will live then it’s a matter of getting to the financial goal that will allow you to have that lifestyle.

Some Work and Some Play
This is not truly immediate retirement but I tout this as an option because it starts your retirement journey now and allows you to phase into a retirement lifestyle. The above two situations require a sudden change, whereas this option is more gradual.

A little tricky
To overlap work and play - start to do some things that you are postponing till retirement. Play some golf, travel the world, take a class, volunteer for social work, invest in a side business, get on a non-profit board, run for local office. You have 168 hours in a week, can you find a few hours to enjoy what you are saving for your golden years? Definitely!

I like this approach because it gives you the option to try out what works for you before you commit to it. You don’t want to find out when you are 65 what you really want to do versus what you had planned to do. I would rather indulge my passions now (albeit in moderation) but get to know what I want. And as I get to know what I want – I can transition from what is today to what is the work/life balance I need in the future.

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1 comment:

Anonymous said...

My husband is retiring from his civil servant position in 8 years at age 55. This is WAY to young to never work again...
But the significance is, he will be able to choose what he wants to do with his time, rather than HAVE to do something with that time.
His pension is probably not adequate for what a lot of people would feel they NEED to live on. But for us it will be more than enough. We will have our mortgage and a student loan paid off by that time. Plus we have zero credit or consumer debt. Also we are blessed to have health care as a part of his retirement package.
For us, these last few years until that time is all about living within our means and investing as much of our savings as we can. One of our legacy goals, is to be able to help our sons in their future...
We are probably going to get back into real estate when he retires. We did it for 25 years, enjoyed it and will probably be ready to do it again by then. Buy and hold for rental income, plus buy-restore-flip for the excitement of it. I don't know...that's kind of the fun about retirement at 55...the possibilities are endless.