What’s Your Definition of Retirement?

You likely know people in your family such as your parents or grandparents who retired in the traditional way. They worked hard for 40 years before they made it to the end of the rainbow and found their retirement pot at 65, whether it was funded by a company pension, Social Security payments or their own investments.

More and more millennials are discovering that the mainstream concept of retirement that I described isn’t what they have in mind. It’s uncommon to have a 10 year stint with the same employer and many are more willing to seek out professional opportunities, wherever in the world they may be.

You also know that money well saved and invested for the short and long term will lead to greater choices in life. This is what financial independence (FI) is all about. It’s about saving and investing as much as you can today so you can get to the business of living your ideal life a lot sooner. Here are two perspectives on living contrary to the retirement status quo.

Living Sabbatical Style

You like your job but you have a list of countries on your bucket list that need crossing off. Being able to save up enough money to be able to quit your job, in order to travel overseas for a year or more, is an example of living sabbatical style. The money saved up not only pays for your round the world trip travel expenses but it would cover any US based expenses during the time that you would be living abroad.

You can opt to work in some of the countries along the way in order to make extra money or just experience living life as a local. Some people repeat sabbatical cycles of working for a couple of years, then taking an extended period of time off to pursue other passions. A sabbatical is not only for indulging in travel. It can be the springboard to starting a new business venture, volunteering with your favorite charitable organization or anything else you want to accomplish.

Financial Independence/Early Retirement

If your idea of retiring is being able to live more of the life that you value today, then striving for FI/early retirement would be something to consider. In this scenario, you would save and invest ideally 50% or more of your salary to build a nest egg of at least 25 times your salary. Once you’ve hit the magic number, you would be considered financially independent.

Many who reach FI status still choose to continue to work part-time, not because they need the money but because they enjoy their work. The keys to becoming FI are:

• Living below your means and keeping your monthly expenses low.
• Earning as much as you can.
• Paying off any existing debt.
• Choosing investments that are low cost and can provide long term solid returns and dividends.

Saving 50% of your salary may sound very far-fetched but by implementing the above, it may be possible to become FI in 15 years or less. Keep in mind that the movements of investment markets can affect the time-frame to FI/early retirement. For some, the path to FI/early retirement beats the conventional road to retirement by a long shot.

Financial independence, however you choose to define it, is all about having choices and being more in control of living life according to your goals and values. You have the incredible advantage of time to acquire the financial resources you’ll need to live well. Take a moment to figure out what really matters to you in life, in order to plan your financial exit strategy.

Are you working to save half of your income? Join the Save Half club on Facebook where we motivate each other to save more.

What’s Your Definition of Retirement? is a post from: Young Finances