We all choose our own path in life. Education and training for a job determine how much money one can earn through your lifetime. There is a strong correlation between education and your lifetime earning potential. How you manage that money and how long you work determine your retirement age and the disposable income you will have to enjoy that retirement.
When one retires is a function of both having the money to retire and ones attitude to work. There are some people whose very essence is tied to their job. Work is how they judge themselves and their self-worth. They get up every morning thinking of work and go to bed thinking the same. They cannot see themselves not working and would continue if their health allows, to work until they die, often working into their 80s. Those people should not retire early, if at all. Despite pressure from their friends, family, job and society that sets early retirement as a just award for all those years of toil, not having a job to go to would be an unsatisfying option. They may slow down often acting as consultants and working only a few days per week. Or they may even take on an entirely different career that may involve less stress or less time commitment.
That is one end of the spectrum. Most of us are somewhere in between. Many see themselves retiring when their pensions start and put in their last years at work eagerly waiting for that day. They all have different plans, and travel at least part of that time figures in that plan. Most though travel for only a month or so each year. The rest of the time at home is spent with whatever hobbies, clubs or volunteer work that they enjoy. Some may simply watch TV all day and are content with that. Others may buy a second home in a warm climate and spend all winter there, sometimes venturing past those borders. Others buy a motor home going to the same place every year for months or sometimes moving around seeing wherever their motor home can take them, usually in the southern US or Mexico if from North America. We all have our own plan.
I chose a different path than all those above. Despite having a very rewarding job, I worked only as long as I had to in order to save enough money to retire and never work again.
I had not traveled much except to the desert SW of the US, and my goal was to see the world in an intensive way. I was 53 and felt confident, if my health was good, to be able to travel at least until I was 70 and hopefully longer.
My immediate goal was to get my country count to at least 100 but it would not be likely that I would see all 197 countries present on earth. But who knows. I don’t feel I have the luxury to go back to the same place twice and try my best to see everything that interests me in each country. There are not many places I have been in the last 7 years that I feel I have missed and will want to return to (Some exceptions are India and Japan where I have missed many places). That requires a certain level of intensity that is not for everyone. I don’t stay in any one place for long. My prime interest is to see all the highlights of that area, then move on. Often it is not very relaxing and I now find myself going home to actually have a vacation. But it is all very intentional and I remain happy with the way I travel and plan on continuing my travels in exactly this manner. Maybe my “style” will change in the future and of course, that would be easy to do. I see myself as a true vagabonder. I travel as cheaply as I can but have no problem spending as much money as needed to go wherever. It is not a way of traveling that would interest many. Again, we all make our own choices.
The jist of this is to formulate a life philosophy that agrees with your personality and goals, obtain the money to do it, actively manage that money to last to fund your dreams, and then to do it. I am living my dream. Hopefully I have given you some ideas on how to pursue your dream.
Financial Management and retirement.
The age of retirement for most is set by the onset of ones pension plan. That age has been steadily increasing in most countries as entitlement benefits are becoming an increasing burden in an aging society with fewer young people to support the plans. European countries like Germany have set the age at 67 and many countries are following suit.
Follow the above Keys to Financial Success and you will have no problem having a satisfying retirement. Save ten percent, have life and disability insurance, save for retirement, and live with in your means. It is simple, takes no special knowledge of investing or accounting, and is based on compounding income within equity based mutual funds over a long period of time. Diversification across sectors, industries, countries while holding a certain amount of fixed income investments depending on investment risk is key.
However I did few of the above until I was 44 years old. I had made my maximum Registered Retirement Savings Plan contributions, had good insurance, owned a modest home, and had no debts. But I had a wife who didn’t work outside the home, three children all into expensive sports, and we spent everything I made. And then I was divorced, half my retirement savings gone, I received only one-third the value of my home, and I had big alimony payments, no savings, and two children in university that I was responsible for. Sounds like financial disaster.
But I had some advantages not available to many people. Nine years later, at 53, I retired with no debt, well off and confident that I would never work again. Admittedly I had a big income. But I maximized the benefits of that to the ultimate. My overhead in my medical practice was very low. My personal professional corporation pays a low tax rate, accumulated money, and will pay me a salary for the rest of my life.
The other main key to my retirement is that I have had a modest lifestyle, and have always drawn a low salary. That speaks to the adage, it is not what you make, it is what you spend. For me it was both. Even with a low wage paid by my corporation, I was still able to save 25% of it. Everything was on an automatic withdrawal savings program. I rented cheap accommodation, bought second-hand vehicles, had no debt, took very inexpensive holidays, and never paid a penny of credit card interest. I still maintain that lifestyle today and an able to travel around the world.
That is how I was able to retire at such a relatively young age, never work again, and travel for 6-7 months every year now for 7 years. I can afford to go anywhere and see anything I want to without having any concerns about how I will pay for it.
That is how I did it. But anyone retiring early, before work or national pensions kick in has to have a similar savings scheme to be able to fund the style of retirement they dream of.
Many people with good jobs have a pension plan that pays them a certain percentage of their income, usually in the 60% range that is available at a variable combination of years worked and age. They are very fortunate and theoretically have a guaranteed income that is quite generous for life. Many are indexed to inflation allowing beneficiaries to not have their benefits eroded over time. However those work derived pension plans are all invested and thus dependent on the stock markets and how they are managed. Nothing is guaranteed. Government employees also have had “cadillac” pension plans. As many state and municipal governments in the US have become bankrupted, the security of their pensions is in jeopardy. I don’t believe there is much security there and many people’s retirement is threatened.
How one invests their personal savings is key to maintaining those savings and deriving an income in the future from them. You may even have had money wise parents who taught you the keys to living a lifestyle within your means, save actively, accumulate wealth, and then manage that money in an efficient manner. Then you are thrice blessed. Most of us have not been that fortunate and have had to learn all these life fundamentals by a combination of trial and error, taking courses, reading books, undergoing counselling, or some other learning method. If you have not done your homework, then problems arise. In my last seven years traveling, I have not met many Americans who have not had their retirement delayed by many years. They live beyond their means, accumulate debt, don’t have a good savings plan, invest badly and thus have no money. If that is you, you may have to work forever and live a very austere lifestyle.