Early retirement planning (starting planning early) or early retirement planning (planning on retiring early). The change in emphasis introduces two completely different concepts. In these turbulent social and economic times both are very relevant and interesting.
Firstly early, retirement planning is important in that the earlier you start the better chance you have of having, at least, a financially successful retirement. The success of the second concept of early retirement, planning will depend on a number of factors:
- Do you have an occupation that gives you a chance to, or be in a position to, retire early?
- Are you entrepreneurial and can you build a business, or businesses, that will provide for an early retirement?
- Did your daddy put you into the position where you can consider early retirement?
To try and get a better understanding of "retirement" I'd like to offer three different concepts of retirement:
"True" retirement should be an achievement.
This is ocurrs when you have reached a financial position. One in which you think that you could live your chosen lifestyle, till the end of your days Without ever having to earn any more money. It is not just some arbitrary, meaningless age!
Highly successful businessmen, business and financial whizz kids and sportsmen often reach this position early in life. But the one downside of this definition is that you can be retired today and "not retired" tomorrow.
This being demonstrated by many skill talented but spendthrift sportsmen.
"Traditional" retirement is an entitlement.
A person has the right to stop working at some arbitrary age. They are entitled to a defined benefit pension and free to indulge in a "deserved" rest. To play golf or bowls, travel, sleep in the afternoon and vegetate. This "traditional" retirement often being the preserve of employees from state or large corporations.
I have always been fascinated by the fact that many very successful people never take this "traditional" route. They are still employed well into their 70's and 80's. Decades after achieving their "true" retirement they still have a purpose and a goal.
The "semi" retired state - or retired but not retired
These are the people who have reached the arbitrary retirement age and are forced to leave their job. But they still have to either work, live a degraded lifestyle, be subsidised or live with a combination of these factors. They have not, and may never, achieve "true" retirement.
Starting early retirement, planning puts you in control and reduces risk as it is not influenced by government handouts or an assumption of entitlement. It's independent of changes in policy and political interference. It can lead to the utopian early achievement of "true" retirement.
Although at present early retirees face the risk of inflation brought about by the short term political expediency of printing money. Responsible savers are being sacrificed for the irrational exuberance and stupidity of the spenders.
Most people will have to follow the starting early, retirement planning option. Starting their planning early in life so that one day, far off in the future, they will be in the position to achieve "true" retirement.
This is a challenging and difficult endeavour.
At the best of times it is hard to save money. In ones early adult days there are the many competing financial demands including children and houses … and even the more irrational status symbols.
Through whichever form of early retirement planning you will start thinking about the issues of retirement. Understanding what retirement means to you and how you plan to live through your retirement.
This will change many times through your life and will evolve through your regular planning process.