A few years ago, the tech company I worked at was acquired. I told everyone I was retiring. I was 30 years old.
Unsurprisingly, I received a lot of skeptical responses: “You mean, you’re not going to work anymore? What are you going to do with your life?”
Each time, I’d have to pause and explain what I really meant by “retirement”.
When most people hear the word “retirement”, they think of beaches, mai tais, and a whole lot of Netflix. Or maybe they envision traveling the world with their life partner.
Whatever your vision of retirement is, chances are that the term “more work” doesn’t come to mind.
And that’s where most of us make a critical mistake.
Today, I’m going to talk about why our common understanding of retirement is deeply flawed. I don’t want you to waste your life chasing an idealized concept of retirement, which, if you ever achieve it, will be far more disappointing than you realize.
I’m also going to propose a much more empowering way to approach retirement. This approach is far more accessible. And it’s far more rewarding.
Have I piqued your interest yet? Great. Let’s get into it.
Mistake 1: You Must Be Old to Retire
Let’s kick things off by discussing what we get wrong about retirement. There are two primary issues at play.
The first issue is this idea that you can’t retire until you’re old.
In most countries, the established retirement age is somewhere between 60 and 70 years old. At that age, the government decides you’ve contributed enough to society and you’re finally allowed to start dipping into the communal pot.
Now to be clear, 65 isn’t that old these days, assuming you keep yourself healthy and fit. Unfortunately, most of us don’t keep ourselves healthy and fit, especially in America. You can shake your fist righteously at that statement but just look at the statistics.
The Global Burden of Disease project, which tracks the causes of age-related decline, showed in 2020 that the healthy life expectancy (i.e., the number of years people can expect to live without disability) is 65.5 years in the U.S.
That means if you’re an American and you wait until you’re 65 to retire, chances are you’ll be disabled in some way by the time you get there.
Interestingly, in Japan, the healthy life expectancy is 85 years. A full TWO DECADES longer. So if you’re waiting until your 60s to retire, maybe think twice before skipping that workout or depriving yourself of sleep.
Mistake 2: You Can’t Work Once You Retire
But why do people wait that long to retire in the first place? Why wait until they’re no longer able to surf or summit a mountain or dance the tango?
The answer lies in our second flawed conception of retirement: the idea that you must stop working once you retire.
This is an incredibly limiting concept. Yet society’s commitment to it is nearly universal. Think about it. As soon as someone retires, everyone tells them: “stop working so hard, give yourself a break, you’ve earned it, you’re too old for that.”
No one expects a retired person to do anything. And in fact society pressures them to do nothing at all.
To some people, doing nothing might sound appealing. But there’s a big problem with it.
In the absence of wages, this approach requires you to save up vast sums of money to cover your expected future living expenses.
Social security doesn’t get you that far, and for us younger folks, social security isn’t even guaranteed by the time we reach our 60s.
Sure, some of us might have pensions, but those are also a far cry from a sure bet. Just ask ex employees of the “unstoppable” IBM after the company decided to freeze its pension plans.
This leaves you with your 401k and any other savings you accumulated. How much would you need in those savings to cover your expenses? Let’s take a look.
Assuming you spend $8k a month in retirement, at a standard 4% annual withdrawal rate, you’ll need to amass a fortune of nearly $2.5 million dollars to produce enough passive income to cover your bills.
Now building a stockpile of $2.5 million dollars is absolutely achievable. But it takes a great deal of time, hard work, and if we’re being honest, luck.
Given that the average net worth of an American at retirement is $190k, it’s fair to say that most people won’t get there.
And of the people that do reach that level of wealth, many end up making irreversible sacrifices in the form of chronic stress, sleep deprivation, and other unhealthy lifestyle choices.
And of course, there’s another huge problem with doing nothing in retirement. Your brain turns to mush. Literally. As soon as you stop mentally challenging yourself, your neurons start dying. And they don’t grow back.
This is why a wide range of studies suggest that age-related decline accelerates dramatically after retirement. People lose their sense of purpose and their motivation to stay mentally fit.
If what I’m saying is starting to raise your blood pressure, just take a deep breath and relax, because I’m about to propose a much better way to go about approaching your retirement.
A Better Approach to Retirement
The solution to this gnarly retirement problem is surprisingly simple: start your retirement today.
Yes, you heard me correctly. I don’t want you to wait until you are in your 60s. I want you to start now while you are still strong and healthy and have the energy to enjoy it.
But there’s one big caveat with this approach. You can’t stop working. Ever.
Now that may seem counterintuitive, so let me explain.
When I say you can’t stop working, I don’t mean you need to work in a cubical the rest of your life. That wouldn’t make any sense.
Instead, what I mean is that you need to keep making money. But it’s time to start doing it on your own terms.
Specifically, you need to make sure you aren’t reliant on a single stream of income for your survival. That means if you are an employee, you need to set up some side hustles.
Don’t know where to start? Come up with creative ways you can solve other people’s problems with the skills you have. People will always pay to have their problems solved.
If you feel like your skills don’t cut it, there’s an easy fix. Open up a new tab and sign up for Skillshare (referral link), which has hundreds of thousands of quality courses on high-demand skills. Or simply search YouTube for millions of free lessons on anything you can imagine.
Once you liberate yourself from a single source of income, you can declare yourself on the path to retirement. At that point, no single person or company has control over your life. Your destiny is your own.
And as you get better at solving people’s problems, two income streams become four, and then eight. In less time than you realize, you’ll have a diverse, uncorrelated portfolio of income streams, which grow as you grow.
At that point, there’s no single point of failure, no frozen pensions, no failed social security system, that’ll prevent you from living the life you seek.
This is what we call financial independence. Or financial freedom. Take your pick.
Sure, this isn’t the same kind of retirement as lying on the beach with a cocktail.
But let’s be honest, that gets old fast. And if you want to live a long, healthy, fulfilled life, research shows that keeping your brain stimulated with challenging problems is the best way to do it.
And to be clear, you can still sip cocktails on the beach. You just want to set things up so that you’re making money while you do it.
Your goal is to unshackle yourself from a single source of income and embark on the path to a healthier, more secure, and more fulfilling retirement.