Every now and then I write an off-topic blog post; today is one of those days. In the past I have shared how I manage my time, in case you are interested in going back and reading that one. Today I want to give you some motivation to save well and retire early. Before I start, I do want to add a caveat here. I am sharing this information with positive intent, and I don’t mean to offend anyone. Everyone has different realities that maybe out of their control – I acknowledge that. But it is also true that others have things within their control, and maybe they simply haven’t stopped to think about it. This article is for those people.
What Does Your Life Expectancy Look Like?
I saw a visual similar to the one below somewhere on the web in the last month or so – sorry, I don’t recall where, otherwise I would acknowledge it.
The image above was built in Excel (you can download the file from here). It has one square for every week of my life, from my birth through until the life expectancy for Australia (about 83). Of course, I may live more or less than that, but life expectancy seems to be a pretty good age to use for this exercise. The colours are as follows:
- Grey has past already (for better or worse). Can’t do much about that .
- Yellow are weeks ahead of me where I will be working.
- Green are weeks ahead of me where I will be retired.
- The chart on the left is Plan A, retire at 65. The chart on the right is Plan B, retire at 60.
Now I don’t know about you, but I like the look of Plan B more than Plan A. On the strength of this chart alone, I finally made a decision that I will retire at 60. More on that later.
How to Have the Choice
Of course, not everyone has the luxury to choose; that’s true. I’m grateful for the luck I have had in life to put me in a place where I can choose, but it was not all luck. And I know that some people don’t even have the opportunity to control the inputs that lead to an early retirement. Having said that, many (I dare say most of the readers of my blog) do. One reason I am in the position to retire is because I have put 20% of my salary into retirement savings since I was 27 years’ old (this includes compulsory savings plans from my employer topped up to the total of 20% by my personal contributions). Of course each country has its own system. In Australia, employees are required by law to contribute 10% of salary into this superannuation savings plan (this is not enough, by the way). But it wasn’t always that way. When I was 27 years’ old, the government requirement was only for 3% contribution by the employer.
So, since I was 27, I topped up the employer contribution to my retirement fund to make the total contribution 20% of my salary. I realise that may seem a stretch for many people, maybe it even seems impossible to some people, however if you would like to read a great book that may change your mind about that, I highly recommend the short and simple book “The Richest Man in Babylon“. My friend (Sammy G) gave me this book as a gift many many years ago. I’m recommending it to you now as a “gift” from me.
I have encouraged both of my daughters to read this book, and to put 20% of their income aside for retirement from their first job. So far, they have done this for every pay packet they received. I started at 27; they started nearly 10 years earlier – that will pay them back big time as the power of capital growth kicks in. I expect they will be able to retire at 55. The trick is to do it before you get it in your first pay packet. For most people, you can live with what you have left and you just get on with life. If it’s too hard to get started, another approach is to put all future pay rises (if you are lucky enough to get these) as contributions to retirement and keep living with what you earn today.
What Does Retirement Look Like to Me?
I doubt I will ever fully retire in the sense that you will stop hearing from me on my blog and in the community. Most of what I do, I do because I love it. But not everything I do is because I love it. To me, retirement is the time in life when I can get up and do exactly what I want to do, because I choose to do it, not because I need to do it to pay the bills. If I keep working until I am 65 before I retire, I will have more money in retirement, but I will also have significantly less time in which to spend it (as per the Plan A/B chart above). Frankly, I think life it too short, literally.
When I do retire in a few years from now, you can expect plenty more blog articles, a bit of consulting work, hopefully a very successful company operating at http://skillwave.training and lots more golf.
A Final Word
It’s never too late to start to plan for your retirement. The sooner you start, the sooner you will be able to retire. Why not use the Excel file I have provided to visualise your life until the end of life expectancy and see if it motivates you like it did me.
I hope I haven’t offended anyone – if I have, I apologise. I also hope I have inspired a few people in a way that they will be “lucky” enough to choose early retirement when the time comes. It is possible to make your own luck!