How much money should you have saved up by the time that you are ready to retire? This has literally become the million dollar question in recent years, especially with so many people still struggling to recover from the recession. And it is partly because of the recession that we now see so many more people taking matters into their own hands to launch their own online businesses. That’s part of the reason why there are so many more budding professional bloggers and Internet marketers today than just a few years ago.
But what does this mean for your retirement?
I came across an article on Lifehacker the other day that outlined how much money you should have saved by what age in order to “guarantee a safe retirement.” Rather than providing a hard figure, it looked at the equivalent multiplier of your annual salary.
By age 35, you should have the equivalent of one year’s salary in the bank. By age 40, you should have two years’ worth. And by the time you are expected to retire at the age of 67, your nest egg should be equivalent to eight times your annual salary. These guidelines seem straightforward, but they come with all sorts of assumptions.
They assume you’ll live until you’re 92 years old, for instance, and the figures are based on someone living in the United States where they get a 3% employer contribution and an average 5.5% annual portfolio growth rate. Do you see a big problem here for all us Internet entrepreneurs?
There is no employer contribution, because you are your own boss. No one else is going to pay for your medical expenses or funnel cash into your retirement fund, because all of that responsibility falls on your shoulders. You need to take care of that yourself.
But then you’ve got to ask yourself, “Why do I want to retire in the first place?” People say they want to retire so that they can travel more. People say they want to retire so they no longer have to suffer through an hour-long commute to the office. People say they want to retire, because they don’t want to be at the mercy of their boss anymore. People say they want to retire, because they want to be free.
You know what all that sounds like to me? It sure sounds like the dot com lifestyle, don’t you think? When you are your own boss and you make your living on the Internet, you enjoy both time and location freedom. You’re already doing what you love and you’re making money doing it.
Several years ago, I followed a similar line of thought when I considered a writer’s retirement. Yes, I write to pay the bills and keep a roof over my family’s head, but I also write because it’s what I want to do. Even if money was no longer a concern, I predict that I would continue to write. Even if I was “retired” in the traditional sense, I’d probably still have my blog and I’d still write a book or six.
Should you strive to eliminate your debt and grow your savings? Absolutely. But unlike the rest of the working class folk out there, absolute retirement is not my endgame. It’s about making more money in fewer hours so it doesn’t feel like work anymore, regardless of whether or not I have a million bucks in the bank.