Retirement? You May Never Know What It Means
Retirement, as we know it, may not make sense, and that’s a good thing
Keeping your mind busy is great! Now, to be forced to work to supplement your income can make old age very stressful — which is not good.
Growing old brings a lot of new challenges. Especially for the body and the mind, which can no longer keep up with the same rhythm as a youth. Even in the professional sphere.
Hence the need to step away from our professional activities. This opens up the possibility of gaining more time for other activities outside work.
A first challenge arrives: no longer having the same remuneration and having to live on retirement income.
This concern grows because it is more evident that we will live longer and longer, but this also implies accepting that we will have to work more and more.
In addition, the household budget is going through a process of change in spending.
On the one hand, if the family had experienced a decrease in spending because the raising of children had often already been completed, this resulted in less spending on food, education, clothing, and many other items.
But, on the other hand, other expenses, such as health care and medicine, have increased significantly, and leisure expenses have also increased. After all, one can’t expect a person to retire in full vigor and stay at home in their pajamas.
In this scenario of many changes, there is also a great financial challenge, especially for those who retired with the social security benefit as their only source of income: how to survive over the years with the pension received?
The value of social security is not enough
The amount you receive from social security is usually not enough to maintain the standard and quality of life you have been experiencing.
Many retirees have seen their retirement income decrease in comparison to the minimum wage (when they retired, they received, for example, an amount that represented six minimum wages, and today the retirement received doesn’t reach four).
Therefore, the group of retirees who earn only one minimum wage is growing. With this, the difficulty to honor the commitments of the domestic budget increases. And the retiree ends up resorting to loans, whose payment, even with lower interest rates, has the effect of reducing their disposable income.
To enjoy a more balanced retirement, it will be necessary to create new alternatives for this new phase.
A good financial reserve is the first of them. The earlier you start, the less effort it will take.
Another alternative is to create options to earn money in this new phase of life. According to specialists, retirement will no longer mean leaving the job market. It will be a transition between activities.
Some tips to help you plan for retirement:
• Try to define what lifestyle you intend to have after retirement. The expenses in this new phase will depend on this definition;
• Do the math. Simulate a budget with the expected expenses. Don’t forget that some expenses increase a lot during this phase (medication, health insurance, leisure);
• Calculate the amount you should have saved to help you through this phase and see how much you should save each year to form this capital. Remember that we all have a debt with our future since part of what we earn today we cannot use now. We must be disciplined to save this resource destined for retirement;
• Try to develop activities that can become a source of income in the future;
Expand your knowledge about the types of investments that exist.
Quit working when you want to
This is one of the points that we most need to think about while we are active! There is nothing sadder than to consider ourselves a burden to others, not to feel independent and masters of our lives.
To be able to retire when you want to, you have to start saving money early.
Get into the habit of saving part of your salary, thinking about your future.
Now, let’s get down to business! How to retire without depending on the government and have a peaceful life?
1- Start saving as soon as possible for your retirement.
The sooner you start, due to the compound interest of the application that you will make, as I will explain below, the less will be your sacrifice in the present. Less you will have to sacrifice your daily leisure time to save.
2- Have a goal
Let’s suppose you want to retire at the age of 60. What is your vision of the future at the age of 60? What do you want to do: Travel? Learn a new language? Take a course? Learn something new?
This vision of the future and your purpose can help you measure how much you would be comfortable living on in retirement.
3- What is the minimum amount you should live on?
Having determined what your future vision is and set your goal for life when you retire, you will have to budget how much you will need to live on.
What is the minimum monthly amount that you would be comfortable living on? Let’s assume $8,000 per month?
4- Be disciplined
Once you have determined your life goal when you retire, and once you understand what the minimum amount is for you to live on an income, with peace of mind, and be able to retire with $8,000 per month, all that is needed now is discipline!
Let’s calculate then?
Suppose you are 40 years old today and wish to retire at the age of 60. With traditional investments, such as investments in direct treasury or savings accounts, considering the compound interest and income tax incidence in each case, you will have to make successive monthly investments over 20 years, or 240 months, of approximately $7,000.
Now, see how good it is to start as early as possible with the plan, as I mentioned in item 1: if you start at age 30, you will have to invest something like $3,500 and $4,000 per month.
The idea, in this example above, is that at the end of the 60 year age period, you will have approximately $2.5 million to have an income of $8,000 per month without diluting the principal.
Do you see that with just a few accounts and a lot of planning and discipline, you can retire without depending on the government?
Final Thoughts
With or without social security, retiring without depending on the government is a great decision, if not the best choice, for those who aim for financial independence and quality of life.
So don’t put off until tomorrow what you can decide today!
Start planning your retirement, regardless of the pension reform or not. Decide and go for it!
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.
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