I QUIT Traditional retirement planning and You Should TOO! (Maybe)
For decades, the roadmap to retirement has been drilled into our heads: work hard, save diligently in a 401(k), and retire at 65 with a comfortable nest egg. But what if that traditional path is outdated, inflexible, and frankly, not right for everyone? I’m here to tell you, I’ve tossed that roadmap aside, and I think you should consider doing the same.
Now, before you throw your carefully curated spreadsheets out the window, let me clarify. I’m not advocating for reckless spending or ignoring the future. Instead, I’m suggesting a fundamental shift in perspective – moving from a rigid, predetermined plan to a more dynamic and personalized approach to financial freedom.
The Problem with the Traditional Plan:
Let’s face it, the world has changed dramatically. Stagnant wages, rising costs of living, unpredictable market fluctuations, and longer lifespans are all making the traditional retirement model feel increasingly fragile. Here’s why it might not be working for you:
- It’s too rigid: The “work until 65” mantra assumes everyone wants the same thing out of life. What if you dream of traveling the world in your 40s, starting a business in your 50s, or simply working part-time pursuing a passion? The traditional plan often postpones these desires, leaving you with regret and a nagging feeling of “what if?”
- It relies on assumptions: Market performance, inflation rates, and your personal health are all key variables that are impossible to predict with certainty. Building your entire financial future on these assumptions can be a risky gamble.
- It can be mentally draining: Constantly chasing a distant retirement goal can lead to anxiety and a feeling of constantly being “behind.” The focus shifts from enjoying the present to sacrificing for a future that may never arrive as planned.
- It ignores individual passions and skills: The traditional model assumes everyone is content working in a 9-to-5 job for decades. But what if you have entrepreneurial aspirations or skills that could generate income outside of the traditional employment structure?
My Alternative: Financial Independence, Reimagined:
Instead of focusing on a specific retirement age and a magic number, I’m pursuing a path of Financial Independence (FI), which emphasizes building multiple income streams and gaining control over my time and resources. Here’s what that looks like:
- Prioritizing experiences over possessions: I’m focusing on experiences that enrich my life now, rather than postponing them until retirement. This doesn’t mean frivolous spending, but consciously allocating resources to things that truly matter.
- Developing multiple income streams: Instead of relying solely on a paycheck, I’m exploring side hustles, investments, and passive income opportunities. This provides a safety net and allows me to accelerate my progress towards financial freedom.
- Investing in myself: I’m constantly learning new skills, expanding my network, and investing in my physical and mental well-being. These investments pay dividends in the form of increased earning potential and a higher quality of life.
- Thinking long-term, acting now: I still contribute to retirement accounts, but I view them as one piece of a larger puzzle. I’m focused on building a portfolio of assets that will generate income and provide me with flexibility throughout my life.
- Redefining “retirement”: For me, retirement isn’t about stopping work altogether. It’s about having the freedom to choose how I spend my time, whether that’s pursuing meaningful work, volunteering, or simply relaxing and enjoying life.
Is This Right for You?
This approach isn’t for everyone. It requires discipline, a willingness to learn, and a proactive approach to managing your finances. But if you’re feeling trapped by the traditional retirement model, or if you’re looking for more control over your financial future, it’s worth exploring.
Here are some questions to ask yourself:
- What are your passions and interests?
- What skills do you have that could generate income?
- What kind of lifestyle do you want to live?
- How much risk are you comfortable taking?
Start Small, Think Big:
You don’t have to completely abandon your existing retirement plan overnight. Start by researching financial independence, exploring side hustles, and learning more about investing. Even small changes can make a big difference in your overall financial well-being.
The Bottom Line:
Don’t let the traditional retirement model dictate your life. Take control of your financial future, define what success means to you, and create a plan that aligns with your values and aspirations. Whether you choose to completely ditch the traditional path or simply incorporate elements of financial independence into your existing plan, the key is to be proactive, informed, and intentional about your financial choices. It’s time to create a future that you’re excited about, not just one that you’re waiting for. Good luck!
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Man, I always just tell people when they ask how long I'm planning on working (they typically ask "till what, 57? 60? 65?") I always just say "when the numbers work out, I'm out".
Hi Kevin, thanks for the videos, I, as a guy at the edge of retirement, am inspired by your inputs a lot. I don't live in the US. Do you have any plans to expand your counsel to other countries' conditions, systems? thanks.
In my opinion, your retirement plan should include a scenario with the market dropping by 30% (or some similar number) the day you retire and staying there for a couple of years. This means either postponing retirement enough to grow your portfolio by the appropriate amount or a combination of that and building enough cash-like investments to live a few years on that.
what if you bootstrap 2 years? Does it matter which way then?
Apparently realize retiring with a good pension and no social security does not get any retirement planning videos. All I see are plans for people with Social Security, Roths, IRA's 401's, etc.
If I understand the scenarios presented, then the "probability of success" model is simply stating the probability of hitting one number/mo. The "dynamic" model just says here's a high number and a low number. It seems to me if you just look at your portfolio and project three scenarios, a boom economy, a flat economy and a bust economy, and then position your spending to flex (important point) with the market, then you're good.
When the market drops – do a roth conversion on the lower value then buy the stocks back at lower prices
Have some other areas to draw money from
I appreciate the recalculation of spending to adjust the success of your portfolio, but it still requires "traditional retirement planning". All financial planners do this for their clients every year, adjusting spending rates for the year ahead based on needs analysis and market events. They also should be examining spend down account order, rebalancing your portfolio, and listening keenly to future necessary expenses.
Kevin thank you so much for making this video! It is great information and definitely one of your best videos. I like the way you highlighted that these ups and downs of the market are going to be a normal part of the process and most people's retirement experience.
I like how you conveyed that most retirement calculators use binary choices. Yep, that's what I went off of in my 20s. Now that we are at the cusp of retirement so many variable happen in life. While it is amazing to forecast these events ideally it is to live day to day cheaply. Fantastic video!
This is one of the best retirement videos I have heard…. Thanks
Common sense, why the so called experts think your spending will not drop in retirement if the market is down is just incorrect. Most people will " naturally" cut spending if they see their investments not doing well in the market and feel more comfortable taking more out in good times. A final note would be to have a "bucket" strategy for your funds to pull from when the market is down. Have a non stock (Cash and or Bonds) bucket to pull income from in down markets to give stocks time to recover. Plenty of info out online about the "bucket strategy"
Is it just me or does this adviser look like a male version of Hillary Clinton?
Awesome. I never realized the Montecarlo calculations were just a pass/fail result. Knowing that if you can only hit 99% of spending on it counts as a fail is so important to know. I wish the videos talking about it all mentioned that. Thanks!
Good stuff.
It’s good to have a plan before the shet hits the fan
I thought this video was brilliant. Checking your financial health when preparing for retirement is a critical step. There are plenty of outdated systems out on the internet – like the Monte Carlo. I created my own scenarios with real data then went through worst cases to come up with guardrails on my own – SO MUCH WORK – so I am very happy that others are realizing the same thing!!
I agree with other comments about this being a sales pitch. Whether monte carlo or dynamic spending strategy, I think, investors shouldn't depend on a single metric to make major decisions – specially get out of the market during serious downturn. All that anecdotal stuff about couples that haven't saved enough to weather market downturn is a scare tactic to sale this tool. These folks most likely wouldn't benefit much which ever metric they used. I HAD enjoyed and learned from a number of his videos, but I can't help thinking this is an infomercial – using horror stories of failed retirement to sale this tool. I think he should be stressing not to make rash decisions during panic period using any single metric or even retire using one than say use this new software to help you deal with that.
This is the first retirement planning video that has made absolute sense to me. I have never understood the percentage-of-success plans (forget about the P/F plans), as if I was helplessly rolling the dice, totally at the mercy of variables outside of my control. This retirement planning strategy instead reflects my ability to make active decisions to change the outcome as variables change. I needed a way to temper my anxiety about retiring. Thank you!