I’ve often said that I’m never going to tell you how much money you need in order to retire. Everyone continues to ask until they read my retirement plan. So here is a brief explanation of why no one really knows how much it costs to retire.

Someone just told me that a baby boomer couple retiring right now needs a two million dollar nest egg in order to maintain a decent lifestyle for their remaining years. A two million dollar investment returning 6% annually, before taxes, yields $120,000 per year! For most of us, that sounds like a great income, right? So what’s the catch?

Good News, Bad News

If you are 40 years old right now or even 50, you could easily live another 50 years. With luck, money and advances in modern medicine, you might be leading an active life 60-70 years from now. What do you think that $120k income is going to look like 70 years from now? (Think of today’s prices compared to those of 1938.) So even if you only used a portion of that income in the beginning, you are going to be dirt poor in your final years.

Lifestyle

And what is a “decent” lifestyle? People used to say that you would spend less after you retire. But we are Baby Boomers; spending less is against our nature. We want to travel, buy expensive vehicles, have the latest gadgets, spoil our grandchildren and of course, pay for our outrageous healthcare costs. To me, that doesn’t translate to a spending cut. Only you can decide what kind of retirement lifestyle you would like to have but even the basic food, clothing, shelter and healthcare costs are just going to keep rising.

So How Much Already?

Luckily for us, the statisticians, mathematicians, actuaries and entrepreneurs have come up with many “calculators” to determine the amount of money we will need enjoy our second adult life. You can find many of them by doing a search for “retirement calculator”. My search listed over 750,000 sites but just try two of the top ten. Go ahead, try it.

What do you think of the figure you came up with on the calculators? Even not knowing the exact amount, I’m afraid I’d have to say, “it is not enough.” If you are satisfied with having a specific figure, great, now you have it. However, Why not just make so much money that you never have to wonder again if you can afford that trip or that car or that vacation home?

What is the Solution?

Anyone reading these words knows how to make money. More than likely, you have made a significant amount of it in the last 20-30 years. Most of that was probably trading your time for a paycheck. So no matter how good you are, there was a limit to how much money you could earn. Some people enjoy making money almost as much as spending it. Money (or lack of money) has probably caused you significant pain and suffering at some point in your life. No matter how you feel about money, it is a fact that to enjoy your second adult life, you will need money and lots of it. I think Mae West said, “I’ve been rich and I’ve been poor; rich is better.” Having money will allow you to live a longer, healthier, happier life. “Earning” money by trading your time for a paycheck will never give you this happiness because you are losing your most precious asset, your time.

Now maybe you have made wise investments in dividend producing securities or own a production oil well or hold patents or songs or movies that pay you royalties. Now we are talking about “passive income.” This is the “smart” money that comes into your bank account whether you are on vacation, sleeping, working or playing with your grandkids. Why not just put forth the effort now to make sure you have a very comfortable life and never worry about money again? Every second of your life is precious because time is a non-renewable resource. Don’t waste it on unnecessary worry or work-hours traded for a paycheck. I think the easiest way to do this is by creating your own Internet marketing business. Once it is set up and starts bringing in a constant flow of passive income, you just monitor it and add to it as your needs change.

Conclusion

If you have a couple of million dollars in the bank and want to quit working, go ahead and take the chance. But if you are willing to work, building your own business in order to guarantee financial freedom in your retirement years, start TODAY. I think it is the smart person’s choice.

By: Rick Perkins