Business Magazine

Retirement Mis-direction and Tips

By The Contender @The__Contender

Mis - direction

Warning Advert!

Our TRiBe still read the mainstream press (although the quality of the articles has been reduced in size and quality down the years). One BBC article that caught our attention was about a young couple desperate to spend quality time with their kids. They did this by selling their (mortgaged) house, quitting (great word quitter - very negative right?) full time teaching jobs and took off in a caravan for a year. They called their adventure the GO > DO LIFE.
It was nice to read about people trying something different - seeking the good life for them and their kids. It was a reflection that the time spent as a young family is fleeting and easily lost to other commitments. Unfortunately for the family involved it was only a year, no income just spending - no sustainability, longevity or way out.
I believe the article glamorises a one year rebellion (perhaps portraying it as a mini mid life crisis). Unfortunately the article was a missed opportunity. It was short with little advice on ways to take time out from from the coal face. There was NOTHING on how to REALLY getting out of the system for a sustained period of time.
The family in question would have to go back to the grind and slowly re-build all of the capital they have spent. Additionally due to continuously raising house prices they would incur more mortgage debt to get back on the holy money cow that is the UK housing ladder.
I felt the article was almost offering a subliminal message "don't do it".  Look they have no job, and living off the proceeds of the sale of their house. This has prompted today's post:
  • Mis-direction: 8 Retirement nonsensical generalisations we are fed by the mainstream media
  • Practical Tips
    • Fighting back: Re-learning rhetoric - asking why
    • Planning for Freedom: Basic steps to plan for financial independence \ retirement

When you're young, your whole life is about the pursuit of fun. Then, you grow up and learn to be cautious. You look before you leap and sometimes you don't leap at all because there's not always someone there to catch you. And in life, there's no safety net. When did it stop being fun and start being scary? - Carrie Bradshaw

Selling the wrong life

We are bombarded with media that says consumerism is good. Admittedly materialism \ consumerism brings some happiness and comfort up to to a certain point. It gives us some short term joy, excitement, at at a cost to you and a gain for someone else.
Media, big business and government all have an interest in consumption and you are their target.
Powerful tools are available to groups interested in your money.
Governments can engage in negative interest rates manipulating house prices higher, change taxation "rules".
Companies use TV, film, magazines, bill boards and Internet pages to sell you a dream.
We are poorly equipped to ignore all of their messages. It is so easy to spend money.
They know we do not have to over spend. We have all we really need to be happy (especially in the West) at low, low prices. Instead of benefiting from increased incomes we chase house prices higher and gizmo's to fill the time we have fee from the treadmill to pay for the house.
The strange thing about it all is that alot of the workforce are there to to encourage over consumption, waste and debt slavery actually being part of the problem. Doh!
We are constantly fed titbit's of information and propagation aimed at our natural instincts to "hoard" and "protect us from danger":
  1. Retirement is for old people - how old and who decides?
  2. You need loads of money saved ($1 Million +) to replace your current and future spending - How do they know this there are too many considerations such as personal living costs and return on investments \ business. This needs to be worked out by each family unit.
  3. You will lack meaning once you have retired - Where is their imagination? Besides they are still working so how could they know?
  4. Retirement too young is dangerous - your money will run out - did they forget to say you only live once so if you don't try you will never know?
  5. You must have a successful career to have achieved in life - First what is the definition of achievement? Achievement is what you want it to be not what someone tells you it is......
  6. Work provides a good role model for your children  - I presume they mean a 9-5 job, get with the system. This way the kids see you work and spend all your disposable income. Meanwhile they (the kids) will be well looked after like you have been in expensive childcare. A picture of normality and something to aspire to! Why would you wish that on your kids - the elite certainly don't.
  7. Early retirement means that you are molly coddling your children and they will turn into loafers - In our experience this is a load of rubbish. We have time to engage in real useful activities such as splitting wood, cleaning the car, painting a picture, making a model and playing chess. We help them with homework and take them to interesting places (we have just been down a cave). We have time to give them a real world education away from the system, idiot box, wired living.
  8. Every day is a Saturday - hence there is no Weekend - that is really a choice and a perception isn't it? Self discipline doesn't stop when you finish work. Get up and do your thing in the week as 'normal' and kick back at weekends.
see articles such as:
5 Reasons not to Retire
5 Compelling Reasons Not to Retire
The Death of the Millionaire Next Door 

Practical tip: Always ask why

Why do children always ask why but us adults have seemed to have forgotten this basic natural skill? Here is a process (widely used in business) to help clarify thoughts and actions:
Take the big vague concern and break it down in to smaller concerns
Ask why is it a concern several times until you understand the
What is the cause of the concern
How can you react to the concern

E.g. - What if I lose my job I will not be able to save enough to retire

3 concerns - lose job / not be able to save / want to retire
- lose job
- why would I lose my job?
   - Company fails
   - No longer have relevant skills
   - outsourced
   - illness
- Take each one again and how would you react?
   - Failing company - stop procrastinating and hoping for redundancy and move company now.
   - Make sure you change roles on a regular basis in work
   - Outsourcing risk do you need to retrain \ change roles
   - illness - are you really looking after yourself

Practical Tip: Planning for financial independence \ retirement

Here are some steps to help to work out financial independence:
  1. Consider all of the large costs you will make in your life and your expected income and its growth year on year. Take the number and multiply them all by 20% (random I know but you have to consider most of the expenses will be made in THE.FuTuRe and will be more expensive than now due to inflation)
  2. Find out benefits that are available to you (tax free savings, employer pension contributions)
  3. Work out how much you want to save into a pension such as 401K(US)\SIPP(UK) (taxed at a later date) or pay into a tax free wrapper such as a IRA(US)\ISA(UK) (taxed at source). This will dramatically impact the date at which you can take early retirement.
    For instance NOT contributing to a pension will result in a much earlier retirement (pensions cannot be taken to a set age such as 55) as you will be able to invest and grow a passive income stream quickly.
    Investing in a pension will provide a future safety buffer that you cannot access. Should early retirement go wrong you will have this net in the future and be able to go back to work until it is available. here are a few consideration:
    1. Save a pension. If your employer offers matching contributions it will probably be wise to start a pension as soon as possible to the maximum matching amount. This IS part of your salary! It IS OPTIMAL to take it!!!!! Do not overlook this money dropped at your feet otherwise the only person laughing is the company and its shareholders. Others considerations are what if you cannot access it until later? What if the rules are changed e.g. the ability for a tax free lump sum on retirement or you have to invest in a government decreed way etc?
    2. No pension. If you do not get any benefits from a pension perhaps you are better off NOT having a pension. By this I mean pay the TAX now and invest in tax exempt savings plans or other investments that provide an INCOME.
  4. Build a rough financial time line (try this tool and keep it up to date!) - this really is key. If you cannot project your finances into THE.FuTuRe you are just guessing and will be flying by the seat of your pants - often with bad repercussions, not only for the pants.
  5. Build a budget tracking tool (capture all or expenses - have a look (monthly?) and criticize your spending - did you really need it, did it really make your life better?
  6. Learn to invest (diversify - such as the permanent portfolio, property, commodities) and build a passive income
  7. Re-visit you assumptions and financial plans (time line) on an annual basis
THE.FuTuRe "I'm gonna get ya! Retire you? You have no idea what is a commin your way so why waste your time chasing financial independence for the odd year or two. I will change the rules, wipe out your savings - you will be stuffed. Wake up and smell the Thyme and Rosemary MR.CoNTeNDeR"
THE.PeSSiMiST: "But..But... But  are you mad? Who in their right mind retires? Way too dangerous. You will be lifeless, a cast out, dead by 50, oh the horreur! I've must (been told) to work until I'm 70 otherwise I will not have achieved in life. My oh my besides they know much more than me I can't be that stupid and retire early"
Peace, prosperity and as always happiness,
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