Retire

When can I retire

When Can I Retire?

Money Maroon

When can I retire? How can I retire? Where can I retire? These are questions that we all have at one point or another. Sometimes, we begin to ask ourselves these questions once we are a few years into our careers, or at a career/life crossroad. At times, we ask these questions not because we “hate” our jobs. Of course, hating your job will no doubt lead to these questions. More times than not, we ask these questions as a matter of wanting freedom. The freedom to do whatever you want. The freedom to spend the limited time you have on this planet as you want. The problem, for many of us, when can I retire is not a question that is our decision alone. The decision to retire is intricately linked to your financial ability to support your retirement.

Can you retire?

Do You Have Enough 

If you are seriously asking the question of when can I retire, you must appreciate the financial factors that are driving whether or not you can retire. How much do you have in retirement savings/investments? This includes funds that are currently in personal accounts, retirement accounts and government sponsored accounts.

With regard to personal accounts, think about savings, property and investment accounts. With regard to retirement accounts, consider your tax advantage accounts such as roth accounts, 403(b), 457(b) and 401k or related like retirement accounts.  The third component to consider is the value of your government sponsored accounts such as your social security.

Now that you have an inventory of your accounts and their value, consider how much you currently spend? What is your projected spending during retirement? When you retire, will you continue to work part-time or will this be a complete retirement? What you are trying to get an estimate on is your cost of retirement and can you afford it. Well, can you?

Location, Location, Location

You have heard this before? The three things that matter in property is location, location, location. Location not only matters when it comes to property, location also matters when it comes to your retirement. Location matters because it will significantly impact your cost of living. Consider not only the cost of goods but also healthcare and taxes. Also, I forgot, location will also impact the type of life that you will have during retirement. Do you want to be sitting on the beach or do you want to be on a farm? Again, location, location, location.

Your Health

There is no point to wealth if you do not have health. I figure you would not want to be hooked up to an I.V drip while having millions of dollars in the bank. If you do not have good health, it is likely that your retirement will be a very expensive endeavor. So have you been taking care of your health? Who will pay for your healthcare? Are you old enough to be covered by a government subsidized plan or will you be paying out of pocket for an expensive premium? This could seriously impact your retirement plans. So when you ask when can I retire, think not only about your financial health but also your literal health.

When Can I Retire?

When can you retire? Well, it depends at least on the above. It depends on what you have saved for retirement. It also depends on what government sponsored programs you are eligible for, the location where you will retire and also your health. It all matters. Once you are able to assess where you are financially, location wise and your health situation, you will have a very good view of when you can retire. Of course, no plan is perfect and life is unpredictable. Who thought we would have a pandemic in 2020 and the related impact. But as is famously stated, “a dream without a plan is a wish.” Evaluate the situation and have a plan.

Conclusion

When can I retire? How can I retire? Where can I retire? These are questions that we all have at one point or another. Sometimes, we begin to ask ourselves these questions once we are a few years into our careers, or at a career/life crossroad. At times, we ask these questions not because we “hate” our jobs. Of course, hating your job will no doubt lead to these questions. More times than not, we ask these questions as a matter of wanting freedom. The freedom to do whatever you want. The freedom to spend the limited time you have on this planet as you want. The problem, for many of us, when can I retire is not a question that is our decision alone. The decision to retire is intricately linked to your financial ability to support your retirement. Can you?

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Saving To Financial Independence Today

Saving To Financial Independence Today

Money Maroon

For many, the path to financial independence begins with saving. No matter if you are a high earner or earning minimum wage, saving is a primary driver of financial independence.  The earlier you begin to save, the better your financial outlook.

Start Now

When should you start saving? The answer is an obvious one, NOW! The earlier you start saving, the more time you will have for your savings to compound. If you have not heard the gospel of compounding interest, I will give you an introduction.

Compound interest is interest calculated on the initial principal and the accumulated interest of previous periods. As such, this is a cycle of earning “interest on interest.” Compound interest will make a deposit grow at a faster rate than simple interest, which is interest calculated only on the principal amount. As such, the earlier you begin, the longer your savings + interest compounds, the harder your money works for you.

Automate

This easiest way to ensure a consistent savings rate is to automate your savings. The typical employee receives a paycheck twice per month. Start saving slowly at a rate that is acceptable for you, and increase the amount over time. Further, have a portion of one or both of your paycheck automatically deposited to a savings account. By automating your savings, you never see the money. Additionally, to save takes no action on your part once automation is in place. But where should you save your money?

High Yield Saving

All saving accounts are not created equal. The average interest rate is 0.09% APY. Banks such as Bank of America has an interest rate of 0.03%. On the other hand, online banks pay a significantly higher interest rate. For example, online banks Marcus and Ally offers 2.0% APY and 1.90% APY, respectively. As you can see, having a high yield online bank account is the way to go when saving for financial independence. The higher the interest rate, the faster your savings will grow.

While saving is an important part of the journey to financial independence, unless you are a very high earner, saving alone will not get you to financial independence. Saving is a tool to be used in combination with other methods discussed here. Save, invest and grow.

Conclusion

For many, the path to financial independence begins with saving. No matter if you are a high earner or earning minimum wage, the earlier you begin to save, the better your financial outlook. Journey to financial independence today.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

Income and expenses

Understanding Income and Expenses

Money Maroon

On a basic level, financial independence requires an understanding of your income and expenses. Without a full understanding of what you are taking home and what you are spending, you will remain financially lost.

Asking The Questions

If you are thinking about financial independence, you have asked certain questions and have come to certain realizations. When did you realize that you may have to work the rest of your life? When did you realize that there are families who could relax and not lift a finger and their wealth would continue to grow? Upon the realization of the first thought, you will almost certainly think of the second.

Was it in school? Were you visiting a friend? Did you overhear a conversation? Were you on vacation? Was it after viewing a facebook picture? Was it following the purchase of a big-ticket item (home or vehicle)?  Were you checking your account balance, reviewing a bank statement, or looking at your paycheck? Were you paying a bill or a portion thereof? Was a purchase declined?

The Calculation

At one point or another, we all do the calculation. If my salary/yearly income after taxes is $X, and my expenses are $Y, $X-$Y = working forever.

At this point, one has a choice: (1) continue down the same path or (2) make a change. You are reading this because you want to/have made a change.

On a basic level, to change the above in your favor requires an increase in $X and/or a decrease in $Y. While this is a basic concept understood by all, the above is easier said than done.

Increasing Income

With regard to increasing $X, you may:

  • Save
  • Request a raise at work, 
  • Start your own business, 
  • Invest,
  • Begin one or more side hustles, 
  • Go back to school, or
  • Change jobs. 

Decreasing Expenses

With regard to decreasing $Y, you may:

  • Give up coffee and avocados (or whatever your daily morning pleasure may be),
  • Downsize your life (reduce the size of your home, or vehicle)
  • Bring your lunch to work, 
  • Cut back on purchases (shoe, clothing), 
  • Move closer to work, 
  • Change modes of transportation (buy a bicycle, take public transportation), 
  • Change living conditions (get a roommate, move in with mom), 
  • Paying down debt, or
  • Decrease the number of vacations/ stay at an air bnb rather than at a five star hotel.

Taking action to improve your financial situation is harder said than done, especially if your financials are impacted by your education level, children, health or student loans. The combination of any two of these will significantly impact your saving rate, and thus your retirement plans. However, the fact that you are thinking about your financial future means that you are ahead of the crowd. Continue on your journey to financial independence by understanding and tracking your income and expenses.

Conclusion

Financial independence requires an understanding of your income and expenses. Without a full understanding of what you are taking home and what you are spending, you will remain financially lost. We will tackle paths to financial independence here at JoToFI.com. Journey to early retirement and financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

Financial Independence: Income and Expenses