Why Retirement is Obsolete and the Goal Should Be Financial Independence

When you ask people under the age of 40 when they want to retire, you typically get three common answers:

1.  ‘Age 50 or as soon as I can afford it’
2.  ‘I have no idea. I can’t think that far ahead’
3. ‘If I love what I do, why would I retire?’

The concept of retirement is based on an outdated model that doesn’t quite fit with today’s economy or the values of the millennial generation. In past generations, the corporate contract awarded a pension if you worked for a company for say 30 years that would cover your retirement income. Pension plans have all but disappeared and now the corporate contract sounds more like the following:

40 years (ages 25- 65) of work, from 9 AM – 5 PM, Monday – Friday with two weeks of vacation per year.  Employers can terminate your employment at any time, so you may end up working for multiple companies and have several careers. You are responsible for your own retirement including how much you contribute and your investment selections. Employers can also choose whether or not to contribute to your retirement.

There are several issues with this corporate contract, but one of the most important is flexibility. Young professionals place the utmost value on flexibility and control. Flexibility in the hours, days and years they work.

• If I can do my job effectively from 10 AM – 2 PM, why do I need to be in the office for 8 hours?
• What if I’m more effective working in the evening than I am in the morning?
• Of our 16 waking hours, we likely spend 10+, either working or traveling to work, which leaves us less than 6 hours per weekday to spend with family and/or handle any personal affairs.
• Five days working for every two days off is not ideal for anyone
• Children are not conducive to 9-5 work schedules; they typically do not get sick on the weekends.
• The idea that we may not get an opportunity to spend more than one week at a time on vacation until after age 65 is depressing.
• Unpaid maternity leave is a joke. It makes no sense to have to work harder to afford to pay others to care for a child whose survival is dependent on the mother.

That is just a small sampling of the challenges that occur with the traditional corporate contract. This means young professionals must be radical about taking control of their finances in order to overcome these challenges and give themselves more flexibility and control in their careers. Financial Independence does not mean saving for retirement isn’t important, quite the contrary, it means you should drastically reduce your debt and expenses so that you can save even more!
Let’s give it a definition and describe what it looks like:

Financial Independence – The state of having sufficient personal wealth to live, without having to work actively for basic necessities.

Let’s take a family whose basic necessities (housing, food, health, transportation) are $2000/mo. Now remember, this family is debt free. Once that family develops enough passive income and/or built enough of a nest egg (interest/dividends from investments) to cover the $2000/mo, they will no longer be dependent on an employer. They can choose to work, choose to volunteer, or choose to pursue their passions and interests.

People will say, “Easier said than done, I’m barely making it!” How much could you save each month if you didn’t have student loans, a car note, a mortgage, credit card payments, or personal loans? It doesn’t take much to imagine what could happen if you stopped paying banks interest and started paying yourself.

Please understand that if you’re in debt, your financial past is stealing from your financial future! Debt is simply an agreement that ‘Someone will give you money today if you pay them more tomorrow’. The problem is, like the Bond movie title, Tomorrow Never Dies. Credit card debt revolves, people in their 40’s and 50’s are still paying off student loans, and people continue to trade-in or lease new cars.

Pursuing financial independence is not a get-rich-quick scheme. We’re simply making the argument that if you want flexibility in your job and your life you have to earn it! If you want to renegotiate the traditional corporate contract, you have to have leverage. If you are able to save/invest enough to cover your basic necessities, you have leverage. The best way to accomplish that is to reduce your expenses, eliminate your debt and save radically.
So the next time you consider buying/leasing a new car, getting that new bag or great shoes, or the latest tech gadget, weigh that decision against the potential of moving closer to financial independence.  GM, Coach, and Apple are already wealthy; maybe you should focus more on investing in yourself.