Tuesday, June 3, 2014

What's the point of retiring early? I'd be bored out of my mind!

We read about people who have retired early in their 40s or even their 30s, but for many of us, we reject this route for a simple reason: we think retiring early means we need to spend the next 10 or so years skimping and saving just to quit our jobs and sit around doing nothing for the rest of our lives.  If this is the only option in retirement, then I would not want to retire either no matter how much I hated my job.  At least working would give me the structure and drive to get up every morning and keep my body and brain in shape.

Here's another way to look at it: instead of thinking of it as "retiring early", think of it as "financial independence" instead.  Financial independence means you have enough assets to create a self-sustaining investment portfolio that will provide sufficient after-tax real returns to fund your living expenses indefinitely.  It's possible using a simple portfolio of stocks, bonds, and hard assets like gold or real estate.  A rule of thumb is you'll need 25 times your annual spending invested in such a portfolio.

The main point of financial independence is that it gives you the freedom to live your life according to your terms.  Want to find a job doing what you love instead of what pays the bills?  You can now!  Want to try out a new career that you dreamed of when you were a kid but opted out of when you chose your major in college?  You can now!  Want to volunteer and help underprivileged kids in Africa?  You can now!  The possibilities are endless when you've cut your expenses and/or accumulated enough assets where they will last indefinitely.  I'll explore ways to invest and reach this goal in my later posts, so stay tuned!

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