Retirement Planning While Sitting On a Beach
The book had been sitting on my desk in my home office for months, staring at me in plain sight as a reminder that I needed to read it. Someday. I had received How Much Money Do I Need To Retire from the author, Todd Tresidder, at the Financial Blogger Conference back in October, but I just couldn’t seem to find the time or the motivation to read it.
Looking back, my mind just wasn’t in the right place.
At the time, getting back on track with our retirement planning was just a twinkle in my eye. We only had a few payments left to our debt management program, but until our credit card debt was gone, we were not in a financial position to concentrate on our retirement strategy.
So the book sat on my desk.
Last week my family and I were on vacation in Florida. With our DMP completed, retirement planning is now on the short list of things to do. I knew I would have some extra down time, so I packed the book. Sitting on beach in the Florida sun seemed like a very appropriate place to read about retirement, so I cracked the book open thinking I’d plow through a couple of chapters. But once I started, I couldn’t put the book down.
I read it cover to cover in just a couple of hours.
From the start, the perspective was different. To me, retirement planning has always been about how much to contribute to various retirement accounts to amass as much wealth as possible for retirement. This book begins at the day you retire, and makes you think about how you will spend money in your golden years, how fast your investments may decline due to your spending, and the possibility of outliving your savings.
Retirement planning isn’t just saving money during your working years, it’s planning how you plan to live AFTER to turn in your final two week notice.
Retirement planning scares people. Believe me, I know, it scared me, too. There are an infinite number of factors that can affect what happens to your nest egg once you reach retirement. The thing I liked best about the book is that it illustrated that while changing any of those factors will alter your retirement outlook, there are only a couple that really have a make or break effect. Todd encourages readers to concentrate only on those big knobs. He shows readers how to calculate not a single magic number of how much you need when you retire, but rather a range to shoot for (he calls it a range of confidence) using our own numbers, and by adjusting those big knobs.
There’s two HUGE things that I took from reading the book:
- Once I returned from the beach, I ran through the exercise in the book again to calculate my own range of confidence. For the first time in my life, I have numbers to shoot for to have squirreled away by the time I retire. I also have confidence in those numbers because they come from someone who knows what they’re talking about. Did I mention Todd retired at the age of 35?
- I need to devise a plan to have some sort of passive income by the time I retire. A rental house, a stake in a business, dividend income, or even all three. Having an income in retirement removes a huge strain from my retirement nest egg. It also increases confidence that I will not outlive the funds I saved for retirement.
To be honest, reading the book has given me a new retirement goal all together. It’s the same financial state that Todd reached when he retired at the age of 35. What exactly that is you’ll have to find out by reading the book. 🙂
The good news is that you can win a copy of the book right here! Just follow the instructions below to enter and I’ll announce the winner in this Friday’s (4/11) I Love You Like a Blogger Roundup post. If you win, I’ll ship it at no cost to you!
Did I mention the copy of the book I’m giving away is signed by Todd?
Read more about what Todd has to say about personal finances on his website, Financial Mentor.
Todd’s got some great stuff over there, but I haven’t read that book yet – sounds like a good one! Thanks for sharing, Travis. 🙂
I highly recommend it, Laurie – it’s an easy read, and I came away from it excited to look at my retirement planning. Sounds strange, but that’s the effect it had!
We are on a very similar paths Travis. I’m just a few months behind you. Thanks for the info. Adding this book to my reading list.
Please do, Brian – we both have to remember that once we get rid of our credit card it’s OK to breath a sigh of relief……then get back to work in securing our future! Thanks for stopping by!
Sounds like a great read Travis! I have my own copy of the book sitting on the desk that I’ve been putting off reading as well. 😉 Thanks for the encouragement to open and read it. 🙂
If you crack it open, I can almost guarantee you won’t put it down until you’re done, John. What are you waiting for, go get it! 🙂
I seem to be reading a lot on retirement lately and this book is on my list to read. Thanks for the push.
Retirement planning is always a hot button in the personal finance blog space, Jack2 – even if you’ve already done some, it needs to be reevaluated periodically. Thanks for reading!
Sweet giveaway!
I have no idea what we need to retire. I suppose we’ll know when we get there. We’re 34 now and plan on working until our kids are out of school at the very least. But I suppose that could change rather quickly! =)
Yeah, that’s the answer I always thought too, Holly….and it’s difficult/impossible to get that number 100% accurate (the book admits that as well). But the book also helps readers at least take a stab at figuring out retirement needs – which is needed to calculate your range of confidence for your golden years. I bet you’d find the book very helpful!
I’d love to read this book! I think for anyone, the most scary thing about retirement is running out of money or maybe the issue of health care and not being able to take care of yourself. I feel really sorry for people who need to work until their 70’s because they don’t have enough to retire on.
I can’t imagine being retired and realizing that my money is gone. Who’s gonna hire a 90 year old? That very thought is very motivating to make sure I get it right! Thanks for your comment, Kim!
I’d love to read this. The scariest thing for me is that I’m 43 and may not be where I “should” be financially, especially if I never get married. 🙁 I better keep at it at the gym so I can stay healthy as long as possible! 🙂
#PFWORKOUT!!!!! 43 is young, and you’ve got a lot of years left to stuff bags of money away. Then there’s that whole passive income thing…..if you can find a way to generate income into your retirement years you could get by with less saved in retirement accounts. Now get to the gym! 🙂
I feel like I’ve planned pretty well, but it seems every time I turn around, there is a new calculator telling me a different target.
A new perspective may be just what I need!
I’m glad you mentioned the “calculators” Vicki…the book specifically addresses those. They offer to tweak all kinds of knobs and buttons on your retirement potential, but in the end they don’t have much of an effect – there’s only TWO things that are make or brake knobs – check out the book and find out what they are! 🙂
I’m only 26, but that seems like the perfect time to start thinking about retirement…let’s go compound interest!
The scariest thing for me is knowing that retirement options that are around now (ie Social Security) are more than likely not going to be around for me when I retire, and that all my retirement truly depends on me and what I’m doing now. Talk about pressure!
Ah, yes, social security – the book talks about that too….you never know if it will truly be around or not. It’s best to not depend upon it. You’re right about 26 being a great time to start thinking about it…time is on your side!
If he was able to pull off retirement by age 35, then he has my attention!
It’s amazing what determination, and a frugal mindset can achieve, MMD. I met Todd in person, he’s the real deal!
This sounds like a great book and I would love to give it a read. I’ve been thinking a lot about passive income recently and how I want to do things today that will set me up with cash flow in the future. I think rentals are a good way to go, especially since you can leverage debt and have the renters build your equity. Who knows, maybe by retirement you will have 100% equity and a sizable cash flow from a rental property or two? Something I’ve been considering for sure.
Rental properties would be a great way to have income in retirement….my only reservation with it is dealing with tenants. Ugh….do I really want that kind of stress in my retirement years?? LOL.
Circumstances differ so much from when you are paying tuition bills to just being a couple again. We have tried to keep our spending down as we paid for 2 private colleges. We just realized we had finished one of them last month. Think $1600 a month kept in the account will help us out?
Looking forward to building on our established wealth, but not knowing when enough is enough.
Uh, yeah…$1600 a month would definitely help build that nest egg, Ray. 🙂 You’re a good man to help your kids out with their college education – hopefully they graduate with minimal or no student loan debt. That’s one of my goals as well….I’d love to have my kids start out their adult life without an anchor of debt holding them down!
The scariest thing about retirement is that I won’t have saved enough to retire on.
That’s definitely scary, Kyra…..that’s the basis of the book – helping you figure out what that number is. then you have something to work to achieve! Thanks for sharing!
Understanding investments in regards to saving for retirement.
That’s actually a whole other subject, Gina. This book will help you figure out how much you need once you get to retirement…but you’ll need additional resources to help you get from here to there successfully. Check out Todd’s website (link at the end of the post), I’m pretty sure he’s got a book covering that subject too!
This sounds like a great book! I have been thinking about how much I will need to save by retirement and I have no idea how to calculate the amount based on how I will want to live and I could really use some guidance there!
The book would be PERFECT for you, Alice – good luck!
Scariest thing about retirement planning for me is that I’m self employed and so I don’t have a hand to hold to walk me through it. My husband has a 401k through his employer, so it’s a START, but I’m ready to sit down and figure out what I need to be doing so that I can retire too 😉
I thought my 401K would be sufficient, Becca – but the more I read the more that sounds like putting all my eggs in one basket (even if the funds within my 401k are diversified). Time to start up a roth IRA, and looking for income for my retirement years!
Thanks for the review! It sounds like I need to pick up my copy soon. Thinking down that road seems really daunting right now, but a tool like this sounds like it will be really helpful in having a solid plan.
I definitely recommend the book, Sherrian – did you get a copy at FINCON? if not, I hope you entered the giveaway….good luck my friend!
This topic came up at home last night. My husband and I are self employed and do not have a Kiwi Saver (what they are called over here) but ironically we have to contriubte to our staff’s Kiwi Saver. We haven’t been able to afford it during the recession years and the last year has been a recovering year where maintenance and upgrades were the priority.
I’m thinking, for us, a Kiwi Saver and an account which we can’t access easily would be the better deal. The government contriubtion is capped at $1040 here regardless of individual and employer contribution. But free money is free money, right? The funds are untouchable for 5 years at which time they can be withdrawn only for a first home deposit or applied for extreme circumstances. Otherwise they’re untouchable until age 65 years. I will have to get advice but I’m thinking we should get the Kiwi Saver but also look for another retirement savings mechanism to have along side. Our kids will probably leave home in the next few years at which time I’m sure we will be able to ramp up the savings.
Kiwi Saver – I love that name! That’s ironic that the subject came up at your house last night, MoniMoni. I agree that you should get one started, as well as look for other retirement savings mechanisms…sounds like you’ve got the forming of a great plan – now it’s time to execute! 🙂
Yeah the name is pretty cool. I just double checked and the max government contribution per year is $520 or $10 per week. If you don’t mind me asking…..In America is your retirement savings contribution pre-tax or post tax? Ours is post tax ie wages less tax then your Kiwi Saver contribution. I’ve been told some countries it is pre-tax and then you pay tax as you withdraw your retirement funds at the other end. I think that sounds pretty cool.
RE: Rental. We had a rental and we didn’t enjoy the experience, I probably wouldn’t go that path again. I’ve heard of groups of people going in together to buy a franchise business that more or less runs itself, and they do alright out that and spread the risk etc. Not as good returns as setting up a business from scratch but less work and quicker returns.
Retirement account contributions are typically pre-tax, Moni – that’s the advantage given to them to encourage people to save for retirement.
Your experience with a rental is my worst fear….it’s definitely something to think about. I think I’d rather be a silent partner in a business that just pays me money. 🙂
I wish that my husband and I could contribute more to our retirement account right now – that’s what is scariest to me! I’m only 26, but I know these are the prime years to put away $. I’m worried I can’t put away right now, as a lot of my “spare money” is going toward the college debt I accumulated ascertaining an almost-worthless degree.
That’s the most unfortunate thing about debt (student loan or in my case, credit card debt), not only does it take away from your present, but it also takes away from your future. The good news is that you still have plenty of time – wipe that debt out as fast as you can, and then move into wealth building!
Since I’m still in debt pay-off mode, I find it hard to switch gears and think about investing for retirement. The scariest thing about retirement for me is that I only have a vague conception of it. I don’t have a nest-egg amount in mind. I don’t have a passive income strategy. I definitely need some clarity in this regard. You sound as if you’ve got that clarity now after reading Tressider’s book.
It really was an eye opener, Prudence….if you don’t win, I highly suggest you pick up this book, or get some information regarding retirement planning!
I have a pension and I know my head is in the sand about any further planning. I’m still in the sinking in debt mode from a divorce. I would love to read this book!!
The thing about pensions are things can happen to the company providing the pension, and poof, it’s gone! I know how easy it is to leave the head in the sand, but you’ll be glad if you take a peek at some additional options, Michelle!
I’m not familiar with this book but it sounds like an excellent read especially for the very young. I’m in favor of anything that causes people to pause and consider other options rather than just doing the standard save a bit and retire at 65 routine. I constantly regret that I didn’t decide on early retirement in my early 20s rather than my early 40s. In hindsight there is no reason we couldn’t have both been retired by 40 at the very latest rather than just being happy to have gotten our act together in our 40s so we can retire in our late 50s.
Considering ALL your retirement planning options at 20ish means that before you run up massive debt or even “just” commit to a giant mortgage, two car payments, multiple kids in daycare etc etc you actually decide you want those things and recognize what those choices mean interms of your retirement. Retiring at 65 is AN option but certainly not the only one and I think that’s a mindset that needs to be shaken off at the first opportunity. If you dream of heading to the office until then, that’s terrific. Starting at age 23 save the recommended 15%, blow anything extra on fun stuff and retire at 65. Done. If instead you pick a far younger retirement age and the corresponding savings rate needed to build the funds necessary to support your retirement, that’s an entirely different calculation. Save 25% and retire in 32yrs; 35%=25yrs; 50%=17yrs; 75%=7yrs and so on. The higher savings rates are only possible if you make a massive salary, or more likely you choose early to live frugally, avoid debt and design a lifestyle that makes savings a priority.
If you live frugally you need far less in savings in order to be financially independent and can retire years or decades sooner. You can also figure out how much you need to accumulate by taking the amount you need annually to live in retirement and multiply x 25. That’s how much you need if you live on 4% withdrawl rate. Easy peasy. This calculation also shows you that every $100/mth you choose to include or exclude from your retirement budget means $30K more or less you need to accumulate ($1200/yr x 25=$30,000). Makes you think about what is important to include and what isn’t really worth the extra effort/years of savings.
The book is great even for the ‘not so young’ JMK. Even if a person is about to enter retirement, it’s worth taking a look at how much you have and compare against how you plan to spend it to see if it supports a long retirement! Thanks for your thoughts!
Very true. I just meant that most of us don’t really start getting serious about retirement planning until our 40s and then scramble to figure out where we’re at, where we ought to be and what’s still realistic going forward. It’s a great exercise to go through and assess your goals vs your current situation. Doing the math and soul searching at any age is a good thing.
On the other hand most 20 somethings aren’t even thinking about retirement because they think “it’s so far away”. If you knew retirement was possible in 10yrs if you CHOSE to save far more of you income rather than dive into the usual spending that many think goes along with having that first job and officially becoming a grown up, would that change your thinking as a new grad? You might still choose the traditional path, but at least you’ll do it knowing you had many other choices. I know it would have changed my path. Choosing to make savings a priority is way easier to accomplish if you do it before you sign up for the big mortgage, car payments, vacations etc rather than afterward. We thought we were on top of things because we were saving 10-15%. In hindsight that was fine, so long as we also dreamed of retiring at 65. It never crossed our minds that choosing a more frugal lifestyle so we could save far more would mean retiring at 40. We’d never heard of any one doing it so we didn’t realize that was even an option on the table. Procrastinating on retirement savings is probably largely linked to thinking that retirement is still 40+ years into the future when in reality if you know the math and start early, then you have endless options and opportunities for financial independence many decades sooner.
I don’t think many dream of retiring to a rocker at 40, but financial independence may mean you can take up a different sort of career that doesn’t pay well; volunteer, start a new hobby, take some classes for fun, or just have endless time to spend with your kids. When you are financially independent you have the freedom to fill your time with whatever interests you rather than whatever pays the bills.
Even at 40, retirement seems very far away – maybe it’s part of that whole I still think of myself as in my early 20’s syndrome. LOL. Midlife crisis coming up any day now! 🙂
The scariest thing about retirement for me is that I feel like I’m starting too late in life since I was more irresponsible with money when I was younger. Now I have to play catch up.
I’m in the same boat, Kelly – although we did manage to stuff away a fair amount before we had to stop contributing and concentrate on debt pay off. It’s never too late to start!
The scariest thing about retirement for our family is the fact we have a special needs daughter. We want to make sure we have saved enough for her future and that she is not a financial burden on her brothers.
I’m glad to hear you recognize that your daughter’s care requires some extra planning, Cheri. Sounds like she has a family that loves her and wants the best for her!
Maybe a good topic for a future post would be to question if people would get serious about figuring out their finances and life goals sooner if we dropped the term retirement and instead focussed on financial independence. I think it’s the same thing – you have enough savings and/or passive income to support you without having to work. Whether you achieve it through massive savings over a relatively short time frame, or by putting in the years required to qualify for your company or government pension, the result is the same, just the timing is different. I suspect the notion of being financially independent would be more engaging to 20 somethings than trying to get them enthused about retirement planning. One has a sense of being proactive and in control, while the other is something they think of their parents and grandparents eventually doing after a lifetime of trudging off to work.
I like that idea, JMK…..and if you read the book you’ll find that’s really the state that Todd is in right now. He says he “retired” at 35….but yet he’s still writing books and advising people on their finances. That’s not your traditional ‘retirement.’ Rather, he’s reached that state of financial independence where he follows his heart and does what he wants, knowing that his income is greater than his expenses whether he works or not!