How to Retire

Retiring is typically associated with quitting work and spending more time and money doing fun or relaxing stuff since you’ve saved, invested, or secured future income some other way.

It’s something many people desire to do as soon as they can, especially if they don’t like their job.

There are some aspects to retirement that are concerning. Working provides people with purpose, relationships, things to do, which can all go away when on retires. Some studies show that people who retire early don’t live as long as others, and the rate of suicide can increase with those who stop working. Also, if one really enjoys their job, it may be difficult to find another activity that brings as much utility as the last job. For Christians, the idea of retirement isn’t in the Bible (running the race with endurance is a life-long event), which shows that it’s not as important as other aspects of life.

Here are different perspectives I’ve explored on the topic of retirement:

Being debt free

If you own your house and plan to stay there the rest of your life, you won’t need to worry about your mortgage or rent expense, which is usually a quarter of one’s income. Only maintence, utilities, and taxes will be included in a predictable budget. All other debt should be gone, in order to simplify the cash flow and lower the amount of cash needed every month.

Estimating monthly expenses

If there is no housing expense, the rest of the monthly expenses should be budgeted. Costs of food, dining out, traveling, charity, Duuse, medical, political donations to Trump, bail, and all other expenses should be overestimated.

Predicting how much longer you will live

Now that you know that you need $1200/month to live, you can guess at how many more months/years you expect to live. I’d overestimate.

Calculate your number

You need $1000 per month, you’re 40 years old, and think you’ll die before 80? To oversimplify (ignoring inflation and pretending you’re not getting investing for growth and dividends) you’ll need $480,000. (1000 dollars/month x 12 months/year x 40 years) Do you have that amount in retirement accounts? Then you could quit your job.

Dividend living

If you only need $1,000 per month, securing that amount via passive income can be done multiple ways with varying amounts of consistentcy:

               -Buy an annuity, where you give a lump sum or continually make payments, and then the annuity will pay you a certain amount or variable amount over a specified amount of time or for the rest of your life. There are at least 6 different ways to set them up, and can be used to plan for future income with certainty.

               -Investing $400,000 in stocks that consistent produce quarterly 5% dividends. (check exxon)

               -Own a paid-off rental property where the renters pay you over $1000 per month

               -Own a business that can deliver you the profits as dividends.

Types of Investment vehicle that are make other people rich and not you:

               -whole life insurance policies: some people ‘invest’ in a life insurance policy, where the money invested goes into to pay the financial advisor, the manager of the funds, other fees, the ‘cash value’ of the insurance policy, and then the equities. If you die before the policy reaches maturity, your beneficiary will get $500,000 (or the amount of money secured in the policy)

               -giving to a financial advisor who buys your mutual funds. You could buy a index fund or mutual funds all by yourself. When you go through Northwestern Mutual or New York Life or anyone like that, parts of your invest go to the advisor, his overhead, the analysts, their marketing budget, other fees and other  non-transparent accounts. Just say “No” and open a Vanguard account or buy other index funds through Schwab or TDAmeritrade or some other broker where you can do the same thing they are doing.

Other concepts:

FIRE- Financial independence, Retire Early

With the FIRE principle, someone (or a married couple), saves and invests a large some of money (at least 500,000) and then retires and lives off the dividends. Or they invest $400,000 in index funds and withdraw about 4% every year, which will last ideally deplete on the day they die.

Saving and investing a sum of money that large is difficult for most. It requires discipline and sacrifice to not spend money and to invest it. It also take discipline to hold a job and train to increase your skills and income, which makes it easier to accumulate large amounts of money over time. It can be done, if that’s what you’re into.

Maybe you won’t be into that if you like to get free money without earning it. Government entitlements such as Section 8 money for housing, welfare, food stamps, and other programs can make it easy to be lazy. Over time, learned helplessness becomes engrained in one’ brain and the ability to provide for oneself and others is weakened.