Financial Independence vs Retirement

Over-50-Plan

Photo from ‘The Money Habit’ blog

Move over Baby Boomers. The Millennials are here and they’re kicking your butt when it comes to retirement!  According to this CNN Money report (click here):

Millennials are the first generation to shun traditional retirement and seek financial freedom instead — when income from savings is enough to cover expenses, and working becomes a choice, often long before the age of 65. Becoming financially independent and retiring early, a process known as FIRE, can be achieved at any income level by saving a high percentage of your salary, or cutting your expenses — or both.

Meet 29 year old J.P. Livingston (not her real name, author of The Money Habit). Livingston quit the workforce when she was 27 after she had accumulated over $2.25 million dollars in her portfolio by working only 7 years in NYC. Livingston says: “Let the Baby Boomers have their “retirement,” with its delayed gratification and uncertain benefits” Young people like Livingston are gaming their income, saving rates and investments to become financially independent and retire early — a process known as FIRE. (Financial Independence Retire Early)

While most Americans commonly spend most of what they earn and fall short on traditional retirement savings,  today’s young people are the first generation to plan for financial freedom: 63% of affluent Millennials prefer financial freedom over retirement, while 37% are saving to leave the workforce altogether. Millennials have a different slant on the way they look at life and rightly so. After seeing so many people lose their careers and jobs while still in their 50’s and 60’s (during The Great Recession) Millennials vowed to kick the status quo and drop out of the rat race on their own terms. No more working 9 to 5 in some cubicle from age 25 to 65, the Millennials desire Financial Independence now vs forty years from now. To heck with retirement!

CNN Money stated they have started a new series and will be profiling many of the new Millennials who have achieved Financial Freedom independence early (20’s and 30’s)and on their own terms. Perhaps we Baby Boomers should pay attention and learn a thing or two. I retired early in my 50’s thanks to achieving my own sort of financial freedom BUT how cool would it had been for me if I were in my 20’s and 30’s instead!

We can start off by browsing J.P.Livingston’s most-read post where she outlines her four step approach to early retirement (click here). She lays out her method this way:

I call these the savings equation and the nest egg equation. As you can see, there are four universal levers we can use to ultimately grow our nest egg, and mastering them in the right order can send you hurtling at light speed toward retirement. In typical order, here are four skills you will find you need to master to retire quickly.

  • Master spending control
  • Expand your income potential
  • Deploy your money for optimum growth
  • Minimize your tax exposure

If you’re in the over-fifty crowd, don’t give up. J.P. Livingston has a two part series whereby she gives FIRE advice to a 53 year old man who fell on hard times and thus saved nothing for retirement. In classic Livingston go-getter style, she doles out this advice:

There’s a lot of work ahead of you. You need your energy to build and implement a plan that’s going to require consistent work and effort. So don’t waste it beating yourself up for what you should or shouldn’t have done in the past. We’ll come back to your experiences insofar as they are helpful in informing you how to change your behavior going forward, but self-flagellation in and of itself isn’t going to help anyone. I don’t care. You shouldn’t, either. You judge yourself from here on out based on what you accomplish of the new plan.

To read more about J.P. Livingston’s financial advice plan for Baby Boomers,  click here.

I’m sort of agreeing with this new Millennial style of thinking. I really don’t think there is anything such as retirement anymore. Millennials believe, and perhaps rightly so, that by the time they reach their 60’s, Social Security and Medicare might not be around. Perhaps we Baby Boomers are the last generation to enjoy such plentiful government benefits. Maybe it is time for us to grab our own lives by the horns and map out our own financially free destiny. Livingston advises that we should always keep an eye on our Net Worth and our expenses. She, just like me and most of our ilk, are constantly finding ways to cut our expenses. It just becomes a normal way of living. Owning a home is also J.P’s route to financial freedom.

In any event, check out the links I’ve provided above and keep an open mind. It’s a whole new world out there and it’s never to late to teach an old dog (me) some very new tricks!

Live well and prosper, my friend. Live well and prosper.

 

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19 thoughts on “Financial Independence vs Retirement

  1. She must have made a lot of money and been spectacularly lucky in her choice of investments. Two and a quarter million would mean saving $321,428 a year. If she did not save that much each year whatever she did save would have had to have a very high rate of return to earn that much. I would enjoy seeing a yearly breakdown of her savings/return for the 7 years. I like her basic idea of living far below your means in order to finance early retirement.

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    • She explains all on her blog. She was a graduate from Harvard. She knew she could make the most money in New York City, so lived in a tiny, five story walk up apartment with her husband. She’s been interviewed and verified by several top media outlets like Forbes and CNN. She’s no dummy for sure and she was not born into a rich family. She’s got street smarts!
      She currently moving into a new home and she’s pregnant. Welcome to the real world! Interesting.

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  2. Hi Cindi! I agree that retirement is changing every single day. I too enjoy reading how others get there and how their life looks once they get there. But I don’t think it is possible for us to all duplicate the success of another–and why would we want to? I tend to focus on what I call “rightsizing” because it is a path to creating a life that fits us in a unique way. When anyone rightsizes their life they take the time to make sure that their life brings them the greatest satisfaction possible–for our entire life. Instead of seeing retirement as an “escape” from work they hate, they make adjustments as they go so they learn to live a life of wellbeing at all times. I also believe that financial independence is possible at any age and never precludes retirement. Thanks for a thought provoking post. ~Kathy

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    • Hi Kathy. Financial Independence may be possible at any age (mine came at 50) but right now, the millennials are obsessed with it. Many of them have dropped out (take a look at the YouTube channel: Carolyn’s RV) and you will see what I mean. Many will do whatever it takes to shaft our society. And the current media is idolizing them (such as CNN and CNBC). From what I can gather, ‘retirement’ has become a dirty word and Financial Independence is all the rage. Scary to say the least.
      Thanks for your comment.

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    • Kathy, we also have to address the elephant in the room. Workers today and in the near future have to face the fact that robots may be replacing them very soon. In my working day, it was outsourcing that threatened my job security, thus my rush for an exit strategy. I think millennials today have come to realize their working days may be numbered so, they better get in there, make their mark and then get out. I don’t know. Seems like an interesting angle, does it not? In any event, I don’t envy the millennials at all. They’re probably going to be in for a very rough ride.

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  3. We could have retired in our early forties but changed our focus to provide great education for our two very smart kids. So we put it off till our early fifties, and neither of us regretted doing this🍀Lara

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    • Lara, the older I get and the longer I am retired, I have come to the conclusion that there is no such thing as retirement. I believe 1000% that Financial Independence is the way to go. People should aim for FI, which doesn’t mean you stop working. You just work a different way for a different goal. I had been anxiously waiting for my hubby to “retire” but now that he has been back working, at a career he loves, I don’t see him ending it in any near future. We have FI for sure and now I see that making him ‘retire’ would have been a mistake. There is no such thing as retirement anymore. Maybe that’s why most of the retirees I have been meeting lately hustle on the side. Life is long. The more you save, the more income stream you have coming in, the free-er (?) people can be.
      I really do think the millennials have tapped into something great. I wish them the best!
      It will be interesting to see how Livingston, who is now pregnant and also bought a home, continues on with her FI lifestyle.

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  4. I wish them the best. No one can predict what the future holds and so many of them change their lifestyles and go back to work when the right job comes along.
    Side hustles use to be called self employed, entrepreneurs, part time jobs, and small businesses and many a baby boomer tried these paths. Then the Internet and dot.coms became the rage. And blogs hustling this new FIRE concept became a new attraction. They had social gatherings to commiserate with other like minded folks. Their popularity surge and mainstream took notice. It was interesting that almost all of these FIREs still had one of the couple working to provide benefits before Obamacare.
    But this is not really a new concept.
    When I got married in 1974, I subscribed to Apartment Life magazine and it introduced me to mutual funds interviewing Peter Lynch, of the Fidelity Magellan Fund, and anther interview with a NY State . University professor who said you can be considered wealthy when your investments and savings made as much as your salary. Then it was your choice if you continued working for the man! I thought this was cool! We, in 1974, were financially independent, definition- not relying on our parents! How many of these millennial as adults didn’t return home for parent support as boomerangs! Like so many others, we were working full time jobs and part time college saving 50% of our take home pay. We crossed over to the professors definition of wealthy in our thirties, the 1980’s when 15 and 16% CDs were available. But it was only a single middle class salary we were matching , I being a stay at home Mom, so we Didn’t feel that wealthy! And then interest rates started their tumultuous fall! So more savings was necessary or more risk in stocks. 401k were introduced eliminating earlier generations pension plans. Once again proving, The only thing for certain in life is unpredictable change, just when you thought you had your life set. Only time will expose if the Millenials plan works out or if it needs drastic changes along the way.
    🍀Lara

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    • Ahhhhh, 15 and 16% interest rates. I remember those. I also remember Peter Lynch. My dad loved him! AND made a fortune investing in The Magellan Fund. The good old days.
      You really know your stuff!
      My brother graduated from Georgetown University and then went on to their medical school. My dad paid cash for everything. BUT, the annual tuition then (1960’s) was only $10,000 per year. Now, it’s $100,000 per semester.
      Life for our young people today is very different than what you and I, and my brother’s age, went through. I would NOT want to be in my 20’s right now. My parents forced me to go to Ophthalmic Dispensing school and that career right now has been taken over 100% by computers. No one wants me anymore.
      So, I became a bookkeeper and finance manager, which later on got outsourced to India thanks to the internet. Next, I became a computer technician and knock on wood, there’s still a calling for that BUT I had to keep abreast of all the technology and innovations, which after a while, just burned me out. I started using the internet when I was 43. Today’s kids are just 3!
      I like the millennials invention of the term: Financial Independence. I like it way better than being retired. FI means I can still be viable and hustle because I have already achieved much and have gotten my freedom. I can still continue to live my life, as before, but without the albatross.
      Let’s see what happens. Somebody has to break the establishment. We Flower Children of the 60’s didn’t.
      I wish them the best too!

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      • Some of the Flower Children did. Traveling the country in vans. Or how about “The Millionaires Next Door” written about the two types of boomers and a book whiich lots of Millenials and Boomers read. “Rich Dad, Poor Dad ” popularized real estate investing and entrepreneurship. You did what these Millenials did at 50 it seems with one spouse continuing to work, downsizing your home, savings from inheritances and legal settlements and you wrote you work part time for a lawyer till 55. So if you consider the old definition of retirement as the cessation of all paid work, you have not been truly retired yet. I gave up my corporate job in 1998 to care for my parents. I did an entrepreneur business between 2000-2004 till my husband took a Golden handshake in 2004, then we both became really retired. The Millenials did not invent or coin the term, financial freedom or financial independence tthey just popularize the concept and strive for it earlier. Perhaps you should change the name of your blog to ” Financially Free and Practicing Thrifty Ways.” Thus removing using ‘retired” since you now disdain the word. I for one Don’t feel real retirement is an albatross but a glorious time of freedom, creativity, re- invention, and endless learning!
        🍀Lara

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      • However it’s sliced, it’s still the same, right? Perhaps nothing is new BUT I do like the new terminology. It just sounds so much better. Like we no longer call people ‘retarded’. They’re just ‘mentally challenged’. Semantics.
        I no longer feel as if am retired. I think I should really consider changing the name of my blog. I sort of like the name you came up. Just needs to be tweaked a bit.
        I’m going to work on it this weekend. If not sooner.
        Thanks!

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  5. Dear Cindi , I just read your blog, Mothers of Estranged Adult Children and my heart aches for you and Nick. Clicked over to the link for Sheri McGregor and then came back and it was gone! What happened? 🍀Lara

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  6. Absolutely My brother and SIL are going through the same thing with their two daughters and same reasons, the presidential elections and took the same sides!Then A sh+t storm of everything they had done wrong and said hit the fan! SIL used emotional eating also and her Doctor is extremely concern over her weight gain. I am going to send her the information on the book.🍀Lara

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    • Lara, once I started telling people what I was going through, all of a sudden people were sharing the same stories with me. It really is an epidemic!!!!
      The book is fantastic. It is just like sitting in McGregors office and getting personal attention. The quizzes will help one heal and move on.
      My best advice: no contact AND concentrate on making your own life the best it can be.
      Keep me posted. Good luck!

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