We’ve all heard the same advice: you have to start saving for retirement.
We’ve heard it from our parents. We’ve heard it from your friends. We’ve heard it from random people on TV. Heck, you’ve even heard it from me.
The advice is well-intentioned. It’s even good. But it misses a key point.
It totally ignores the question of what you actually want from life.
The advice to “save for retirement” typically includes the assumption that “retirement” means to same thing to everyone. That is, you work until age 65, at which point you stop working and enjoy your golden years fishing, traveling, babysitting grandkids, or whatever else you’ve waited your entire life to have time to do.
Maybe that’s exactly what you want. Maybe not. But it’s important to recognize that the traditional view of retirement is NOT the only option available to you.
In today’s world, you can define “retirement” any way you want.
Where does the traditional definition of retirement come from?
I’m actually not 100% sure where the traditional view of retirement comes from, but I think it’s primarily two sources:
- Social Security – In the Social Security program, “full retirement age” is defined as anywhere from 65-67, depending on when you were born.
- Traditional pensions – These are becoming less and less common, but here again “full retirement age” is often set at age 65 or somewhere near there.
In both cases, it’s not until age 65 that you can start collecting full retirement benefits. And in both cases you may even be able to get a bigger benefit by working longer.
These big programs were the only real options available to most people for a long time, so working until 65 just became the standard way that things were done.
And even though the world has changed a lot over the years, our society hasn’t really updated its view on retirement. The assumption is still that you’ll work full-time in a traditional job until age 65, and any other viewpoint is looked upon kind of strangely.
But that’s started to change.
Why you can do it differently
There are two very simple reasons why you don’t have to adopt the same definition of retirement that everyone else does:
- Social Security is just a government program, not a code you need to live your life by.
- You have more options than ever before to save and invest your money in ways that make it possible to live alternative lifestyles.
That second point is the real key. A lot of people worry about the shift away from traditional pensions, where your company guaranteed some amount of income in retirement, towards things like 401(k)s and IRAs where the burden to save is on you. And there are some legitimate societal concerns there, particularly for older generations that don’t have as much time to adjust to the change.
But for the well-prepared, this shift actually opens up a lot of opportunities. Here are some of the big advantages you have today that didn’t exist for past generations:
- The money you save is yours – Unlike with traditional pensions, where you had to rely on your company’s word and you had to stay with the company for years to maximize benefits (or even keep them in some cases), the money you put into a 401(k), IRA, or regular old taxable account is yours, plain and simple. You can move it with you as you change jobs, start a business, become a stay-at-home parent, or whatever else it is you choose to do.
- You can choose to save more – You aren’t require to wait until 65, or any particular age, in order to get “full benefits”. If you’d like, you can choose to save more so that you can reach your financial freedom sooner.
- You have better investment options – It used to be really hard and/or really costly for regular people to invest their money well. That’s no longer the case. We now have easy access to top-notch investment options that not only perform well, but require minimal work to maintain. You can put your money to work making a better future for yourself, no matter where you’re starting from.
- You have more choices when it comes to work – Technology has made it easier than ever for people to work remotely, start side projects that could eventually turn into full-time gigs, and generally do things more efficiently. You can certainly still take the route of finding a good company and working your way up, and for many people that’s a desirable way to go. But it’s no longer your only option.
These aren’t trivial things. These are radical changes that open up an entire new world of opportunity and allow you to define “retirement” pretty much however you want.
In fact, I’m getting to the point where I’m not even a huge fan of the word “retirement”. To me, financial independence is the phrase that gets much closer to what I see people wanting to work towards.
Financial independence isn’t about working until you no longer have to work.
Financial independence is about purposefully building the financial resources that allow you to live whatever life you want to live, as soon as possible.
So what do you want?
There’s no right answer here. Some people love their job and would happily keep doing it until they’re on their death bed. Other people might view their job simply as a way to make the money that allows them to pursue other things like travel, volunteer work, or spending more time with friends and family.
The point here is that the choice is yours. The traditional view of retirement is now just one option of many.
What do you want?