My Retirement Plan

I am not going to settle for a barely-getting-by retirement. I haven’t worked all my life to sit and just make ends meet for my golden years — simply surviving until I die.

I am not going to settle for a retirement where my money may or may not run out when (and if) I’m 85, 90, or 95. That would feel like living with impending doom and a lifestyle I would hate.

No, the traditional retirement isn’t for me.

What is the “traditional” retirement you may ask? Something like this:

• You work a 40+ year career, saving for retirement as you go along.
• When you get to 65 (or older), you retire and live on a combination of Social Security and your savings.
• If you’ve done it “right”, the savings portion allows you to withdraw 4% (the old rule) of your savings every year with a fairly high confidence that your money will last longer than you will (something like a 95% chance your money will last until 85.)

And this is the retirement plan for those Americans who are pretty advanced in their saving and retirement plans. Most Americans simply have “work longer” as their plan.

Anyway, the above plan is at least decent. That is until something happens:

• What if you live past 85?
• What happens if some large, unexpected expense comes along?
• What if inflation rears its head and your money only lasts until you are 75?

No, this sort of “a lot of things could go wrong” retirement isn’t for me. Instead, here’s what I’m planning on the following:

Accumulating a substantial amount of assets that I can then turn into income generators, churning out enough income that more than covers my annual expenses.

What’s that look like? Something like this:

• $3 million in assets
• Assets generate a minimum of $100k in income per year
• I live on $70k per year

The benefits of this plan are probably clear, but let me spell them out just in case they aren’t:

• I can retire and completely support my lifestyle on income generated from my assets.
• The assets themselves are never touched. I live only on the income they provide.
• There’s a safety net of $30k per year in case something bad happens.
• Any Social Security money added to this is gravy.
• Any income from a job I may have is gravy.
• Any income from a job my wife may have is gravy.
• Any income from a side business we may have is gravy.

In other words, we have more than enough income generated to cover our needs (and we’re not skimping — we have a $70k budget!) plus HUGE margins of safety.

Yes, this is the sort of retirement I want to have.

But there are a few challenges to this plan:

• I have to get $3 million.
• I have to get it to earn $100k per year.
• I have to account for inflation.

Let’s tackle those one by one:

• $3 Million – I hate to get specific because it seems like bragging, but let’s just say at my current rate of savings, depending on the market’s performance, I should hit $3 million in the next two to five years.
• $100k income – I will detail how I am planning to invest my money so it earns at least $100k in another post, but for now just consider this: I’m planning on having $1 million invested in rental real estate earning 10% after all expenses. That amount alone gets me to my goal — and I still have $2 million to invest for income.
• Inflation – My plan for inflation is to so vastly over-deliver on income, that inflation is never a threat. As you can see from the bulletpoint above as well as all the income “gravy” I have as potentials, that shouldn’t be too hard.

Of course, there are many more details that need to be worked out. In my next post, I’ll get a bit more specific and give you the numbers I’m looking at in order to make this plan a reality.

Source: http://wealthlion.com/my-retirement-plan/