In today’s show, we discuss the Second Tenet of FI which is Redefining Retirement. For some, that means retiring in the traditional sense and not working at all; for others, it simply means choice or freedom to do what you want. This may mean working on passion projects or just working less. It also means rejecting the traditional retirement age of between 65 and 75.
Choice, Freedom and Retiring “to” something were the common themes when others were asked what Financial Independence means for them. Financial Independence means you have enough passive income via investments to cover your living expenses when you choose to retire.
For many, that means they have saved at least 25 times their annual expenses. Then, based upon a safe withdrawal rate of 4%, you are free to withdraw that amount every year to live on. If you want to get a more in-depth explanation, this article from Kiplinger is one we refer back to often. It is important to remember that the 4% rule is simply a guideline and you may need to adjust up or down depending on a variety of factors.
Another way, and the one we plan to use to retire at 55, is to have income properties that generate an annual income at least equal to our living expenses. Our plan is to continue to invest in low-cost index funds but we do not intend to draw upon them if we don’t have to. If all goes as planned, our index funds will be left as a legacy for our children.
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WE HAVE A NEW WORKBOOK!
This workbook is based upon out 7-Step Money Foundations course and can be used as a companion to the course, or on its own.
It is a NO NONSENSE designed to take you step-by-step through your finances and build a solid money foundation so that you can reach your money goals.