Many people would want and love to retire early after financial freedom, but the issue is there are many questions that stop people to really retire even if they really has enough money/cash flow?
Do I have enough when I retire now? Would I run out of cash before I leave the surface of Earth? What about sudden expenses like health concerns etc?
Let’s say if you have 1 million, will you run out of money?
There are also practical questions of whether one should FIRE or not.
Read this FIRE! The beautified ugly side of retiring early to find out the two sides of the coins if you are considering FIRE.
Please also note that the longer you drag your FIRE plan (if you have), the riskier it become. You only live once. What if Later never come?
Common way to count enough or not
Many people want to retire early, hence there are many talks/theories about using withdrawal rate of 2-4% or even use dividend to cover expenses etc… It’s all about saving and investing wisely to build up enough wealth to cover living expenses and have the freedom to retire early and live life on your own terms. Life is so difficult to decide, but that’s what make it beautiful isn’t it?
There are two commons way of how people count they have enough or not.
1. Withdrawal Rate of 4%
Many would have heard of this, but what is the 4% withdrawal rate?
The 4% withdrawal rule, also known as the “4% rule,” is like your easy-to-follow roadmap for early retirement savings. It says you can take out 4% of your initial retirement nest egg every year to cover your bills and have your money last for around 30 years or more. It’s basically a cool way to make sure you don’t run out of cash during retirement. It is assume that the return rate of your portfolio can outlast your life and withdrawal rate of 4%.
Now, this rule is not just some random idea. It looks back at how the stock market and bonds performed in the past. It assumes you’ve got a mix of stocks and bonds in your retirement fund and that you’re going to bump up your annual withdrawals to keep up with rising prices (that’s called inflation). So, it’s like this guideline that says, “Hey, based on history, this plan should work for most people.”
However, some who are more conservative, can use 2.5% or 3%.
2. Passive Income > Expenses
Passive income > Expenses.
This is one of the most common way that people share. One of the most common passive income would be dividend investing.
This means that you dividend income yearly exceed all your expenses, hence, theoretically you can last forever, there is no need to sell any shares, just collect dividend years after years.
However, don’t forget that Dividend Investing could be dangerous.
But this passive income is compare to expenses, see method 3 below.
A new interesting way that I have heard today.
Passive Income more than your Active Income.
I saw this from InvestingNote, from the “Guru Happily” with lots of cash flow and assets that have already FIRE!
Let me screenshot what he has posted.
Personally, what struck me most is this
No need to get paralyzed and paranoid over hypothetical suddenly shock events. If you passive income already same or more than your active income, there is no need to over provision for such events.
Personally, I am paranoid. I have enough passive income to cover expenses of family and with left over income left but I am personally worried about such scenarios, especially I have young kids and elderly parents. Hence, I am still working, but with everyday gone, means lesser time left on Earth.
However, I saw the below online recently:
By the time your kids are 12 years old, you will have spent 75% of all the time you will ever spend with them. By age 18, that percentage increases to 90%. Treasure your limited time with them, money can be earned back.
However, if I compared my passive income to active income, my passive income is lesser than active income. So this means I am not ready yet. I need to convert more active income to passive income such that one day my passive income will be greater than active income. But that one day is very far!
What do you think of the method?
Passive Income more than your Active Income, not expenses!
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Money just buy you the chance of freedom but can’t buy back time. In life, there is no reset button. Time is limited but money is not.
When you are young and working, you exchange time for money. When you are old, you can have lots of money but you can’t buy time back, especially the things that you have missed (your strong health, time with young child) while busying striking out in career.
Your kids grew up and they no longer need you to accompany them. They no longer want to sit on your lap to share/do things with you…all these time you spent in your 9 to 6 or even longer cubicles…can the money that you have earned by you back these?
We always thought we have more time with our old parents, but we are wrong. Time with them is ticking away every day. One day it will suddenly be gone. There is no regret medicine, no reset in time. Gone is gone and cannot come back. No matter you are billionaires or millionaires, you cannot reset this.
We always thought that we have more time with our spouse every day, but we are wrong. One day they will be gone too. When you read this, please go tell your spouse that you love him/her and he or she is the best thing that you ever had in your life.
Love your life daily. You have one less day with your spouse, parents, children and yourself. Time is ticking away.
Focusing Careyourpresent & living a fulfilling life by supercharging your mind & investment/online income. Careyourpresent Series focus on things that one MUST know in their Life.
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- Three Pictures to change your Life and Mind
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- The Best Advice to Parents and Child
- What if Later never come?
- What will you bring with you on your last day on Earth?
- Time is the ultimate currency, not money
- Our Life only have 5 short Days – we should live the best for every day
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- Careyourpresent : You might not believe it. It’s little unexpected things that make up a real life
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- Careyourpresent: Frozen. Let it go!
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