What do I Need to Retire?

The day after Independence Day is a great time to start your journey to becoming financially independent.  So What do I Need to Retire...This is one of the most popular questions that I get from people.  What do I need to retire?  Or another similar question, How do I create a good retirement plan?  What you need to retire is...a chair.  You will need to create a metaphorical retirement chair.  Each leg represents a revenue stream, so the more legs you have, the sturdier the chair will be.  If you have no legs, then you are sitting on the ground like being homeless, metaphorically.

1.  The first leg of your retirement chair is a pension or a defined retirement plan.  This is becoming more rare with civilian employers now, so finding a job with a pension may be difficult.  The most common, and most applicable to this blog, is the military retirement.  Civil Servants have the FERS pension and teachers, firefighters and police have their individual state pensions.  I would like to say this is the safest leg to lean on, but I can't anymore.  Corporations, with help of corrupt government officials, have made it where companies in financial trouble can reduce or eliminate pensions promised to workers that have fulfilled the requirements of earning a pension.  Either way, defaulting on pensions is uncommon and defined retirement plans should be a leg in your retirement pay.  The higher you go up in your career and the longer you work there, the stronger this leg becomes.

2.  The second leg of your retirement chair is your own retirement investments.  This leg is my favorite because it's something within our own control.  We make the leg as big or as small as we want.  Your retirement investments can be from 401(k)s, TSP, 403(b)s, etc.  At the minimum, and if applicable, you should ALWAYS at least invest enough to maximize your employer's contributions.  Your employer's contributions are basically free money.  This leg is also where your IRAs, both ROTH and/or traditional, fall under.  And lastly, this is where any other taxable money that you've managed to save comes in.  The more you save, the more revenue you can generate making the leg stronger.

3.  The third leg of your retirement chair is property.  This leg should include a paid-off house in good condition, and depending on your income range, a rental property that is managed by a property management company.  If your plan is to retire by 60, then you should own a house by 30 if you plan on getting a 30-year mortgage or 45 if you get a 15-year mortgage.  Due to unknown health reasons, you may be unable to take care of the house by yourself anymore once you reach retirement age, so make sure it's continuously in good condition by doing all the required preventative maintenance.  Your retirement income is usually less than your working income (it's usually 75-85% of your income) so it's sound financial planning if you could have the house paid off to maximize your disposable retirement income (and to spoil any grand children rotten :).  A rental property, managed by a good property management firm, is a great way to strengthen this leg and keep some good passive income.

4.  The fourth leg, and my least favorite, is your social security check.  I have plenty of personal opinions regarding Social Security, but I'll keep them to myself.  Your social security benefits can be increased by the length of time you work.  Also, you can increase your benefits by delaying when you get them when you are of the applicable age.  Social Security benefits continuously reduce while we continuously pay more to it, but there's nothing we can do about it.  The best way to use Social Security is to get as much of it you can and as soon as you can.

These four legs create a sturdy chair of retirement.  If you open a side business, get another job, write a book, etc. and earn a revenue stream with it while in retirement, then you are just increasing the sturdiness of your retirement and will be more independent.