My Retirement Plan

my retirement plan 2

My Retirement Plan

If you follow my posts on FeeX, you know I talk a lot about retirement. Retirement is exciting to me because it’s synonymous with financial freedom.

While many of my posts in the past have been general retirement advice, today I want to talk specifically about my personal retirement plan.

When I am officially retired I want to make sure that I have enough – or more than enough – money to never work another day in my life.

How do I calculate what I’ll need to retire? That depends on when I plan on retiring. I think it’s safe to say that you will need enough in retirement to live past the age of 90. While you could pass away any given day, you still need to plan on what you’ll do if you end up living well into your 90s. I shoot for a retirement age of 65 but I’m also open to early retirement, which I will discuss a bit more towards the end of this post.

My Retirement Dreams and Goals

There are a few things I’m looking for in retirement:

  • A house that I own free and clear, along with money for repairs and improvements in the future
  • Enough money for future health care-related expenses
  • Enough money to travel at least a few times every year
  • Enough money to live comfortably in my day-to-day life until I am well into my 90s

These are some of my “bare bone” desires in retirement. I could have a very happy retirement with just these things. But if I dream a bit there is more that I want:

  • A cabin on a lake
  • Enough money to travel at least once a month
  • Enough passive income to fully pay for my monthly expenses

These are my “next level” desires for retirement. I don’t need them for a happy and financially secure retirement, but they would make retirement even more enjoyable.

How I Plan to Get There

How do I plan on getting to retirement? Working. Lots of hard work. There is no getting around the fact that to get to retirement you need to work and provide value that, in turn, provides you with money to fund a comfortable, work-free, retirement.

Anyone could give you a generic answer like that, so allow me to go deeper by explaining some of the specific things I plan on doing to save for retirement.

A while back I wrote a post that shared 5 ways to start building retirement savings. Without savings retirement is impossible. The 5 ways to get started with building retirement savings are:

  • Start contributing to a 401k
  • Start contributing to an IRA
  • Start contributing to an Health Savings Account (HSA)
  • Start investing in stocks in an individual investment account
  • Buy a House

I go into more details in this post, but these are five great ways to save money and assets for retirement.

I personally do not have an IRA, nor do I invest in stocks in an individual investment account. I currently have a 401k (if you don’t have one read this post to learn how to get one), HSA, and a house.

There are many opinions about how much you need to save to retire. One way to simplify the process is by going to a site like CNN and using their retirement calculator. This will tell you whether you are on track for retirement by your target age or not.

Personally I plan on continuing to increase my retirement savings rate year-over-year. One strategy that works well for this is not giving in to lifestyle inflation. Instead of inflating your lifestyle when you get a raise, you can use that money to increase the amount you contribute to your 401k, IRA, HSA, etc. Additionally when debt is paid off – such as student loans – you can ramp up the contribution to your retirement account instead of using that money for lifestyle improvements.

When I recently received a promotion at work I increased the percentage of my paycheck that goes towards my 401k. I plan on doing this for all my future raises and promotions as well. Additionally I put the maximum allowed towards my HSA. HSAs are similar to IRAs but offer the additional advantage of allowing you to withdraw funds (tax-free) to pay for qualified medical expenses.

Regardless of what financial advisers say about retirement, I don’t think that there is a “one size fits all” approach to saving for retirement. I do think it’s important for people to at least start saving – and the earlier the better.

Thoughts on Early Retirement

Early retirement is a hot issue and something many people have thought about. I think the biggest issue with early retirement is that sometimes people think simply quitting your full-time job to work for yourself is a form of “retirement.” I really don’t see it that way.

I wrote a popular post about how to retire early. A lot of it has to do with passive income and being willing to sacrifice to get there.

As I said earlier, in my ideal retirement I would have enough passive income to live off of. This requires a considerable amount of equity, whether it’s in the form of rental properties, dividends, or some combination of the two. The reason passive income in retirement is ideal is because you aren’t slowly spending money you saved for retirement. Instead that money “goes to work” for you, providing you with residual passive income.

What are some of your goals and dreams for retirement? How do you plan on getting there?

David Carlson works in finance and is a personal finance blogger at Young Adult Money.  You can find him on twitter @YoungAdultMoney or @DavidCarlson1.
  • Will L.

    +Roth IRA
    +401(k) or equivalent (self-401(k) or SEP-IRA when I’m self-employed)
    +Taxable investment account
    +Farm land + its income

    So basically stocks and dirt. I may get into buying houses if I get bored.

    • Molly @ FeeX

      Stocks and dirt—I love it. Any interest in writing a post for FeeHacks about those farming plans? Sounds like an interesting plan, and pretty unorthodox in comparison to plain ol’ IRAs and 401ks.