When I say the word “retirement” to you, what do you think of? Are you scared? Are you excited? Are you thinking that's never going to happen? Are you wondering what the heck you're going to do with your free time?
What Does Retirement Mean to You?
One of the things I’ve found over the years, and it started way back when I was working on my master's degree in psychology, was that so many people have extremely different definitions of what retirement is.
I remember I asked somebody what his definition of retirement was, and this gentleman was about 30 years old at the time. His definition was helping his clients find the right financial service products for their families and being able to enjoy life while he did that. Then he said, “Actually, by that definition, I'm already pretty much retired. I'm grateful for the life I have, I'm doing well, and I'm enjoying what I do.”
Meanwhile, other people have a definition that goes more along the lines of “I'm going to do a job I really don't like for so many years, then eventually when I'm older and can't move as much as I used to be able to and can't jump as high, I'm going to stop working and I refuse to work anymore. And that's it: that's all I'm going to do.”
Pick Your Future
Of course, there are also a lot of in-betweens between these two attitudes. What I'm going to invite you to do is to join me looking at ways to redefine what retirement is in a way that's not only easier to enjoy and to attain, but that will allow you to be in the process all the way through and enjoy each step of it.
Which of these retirement plans would you rather live out?
Plan A
When you're 20 years old, you're working 50 hours a week at this job and let's say you're making $16 per hour, or $40,000 per year. To keep things simple, let’s say you do this from age 20 to 29. So in your 20s, you're making $40,000 dollars a year working 50 hours a week.
In your 30s, you're worth more. You become more skilled, you're more intelligent: you're a knowledgeable worker. If you’re still working a 50-hour week, then now you're making $50,000 per year in your 30s. The trend continues. In your 40s, you know even more and you're able to make $60,000 a year in the same amount of time. And then in your 50s, you're making $70,000 a year.
So you make this money, and by the time you reach your 60s you say “That's it, I'm done, I'm retiring at age 59 and 364 days. I'm not working in my 60s, so I'm done. I’m not making anymore money. I don't care that technically, I'm probably worth more now.”
If we do the totals here, you've worked a total of 100,000 hours throughout your life and you've made $2.2 million dollars throughout your life, and you're averaging $22 per hour.
Plan B
You say, “You know what? I've got a different idea. I want to have more free time when I'm young, so I'm going to work less time. And in fact, I'm really pursuing this because I also realize that my hourly wage is going to get higher as I get older. Right now, when I'm younger, my time isn't worth as much, because I don't know as much. I'm going to keep my expenses light, and so I'm going to work 32 hours a week for the first 30 years of my life, then I'm going to slowly drop it down.”
But there’s something else to this approach too, and it’s something I’ve watched with clients, ex-clients, and friends of mine. I've seen so many people who reach the income they need so they can afford to retire, so they officially retire. They close their business, and they're bored. For 40 years they've run a business: they've done things, they've made things happen. Now there are not as many people to hang out with because most people are working. Many people keep working in their 60s or 70s, after all.
And so the Plan B person says “I'm just going to work fewer hours progressively, and in my 60s I'll be down to working 20 hours a week. In my 70s, I'll work 16 hours a week. So I'm working fewer hours, but I still want to do something. My hourly income is going up, so I'm going to make the same amount of income over this time.” More importantly, I'm going to get to enjoy 18 extra hours a week when I'm younger. I'm going to enjoy my youth.”
This person is also going to have a higher average hourly income because they’re making the same $2.2 million, but they’re doing it in 86,000 hours instead of 100,000 hours. Sure, 86,000 hours might not sound too appealing, but this person got the same total lifetime income, with a higher average hourly income, so they’re freeing up 14,000 hours.
Those are real hours that they can enjoy all the way through their working life. Let's say an average work day is 7 hours: that's 2,000 fewer days of work. If you worked 50 weeks a year, that's 40 years of taking Fridays off. 40 years! That's almost 6 years of additional free time.
