How to Plan for Retirement & Financial Independence

By Kent E. Irwin

The concept of retirement is becoming outmoded. The new and better phrase is Financial Independence. Let us discuss what Financial Independence is and how to achieve it, and identify some of the challenges.

Financial Independence Defined

Financial independence is the ability to be able to live off the investments and assets that you have accumulated, without the need to earn a paycheck from an employer. The lifestyle that one enjoys after reaching this level is based not only on more leisure and hobby activities, but the pursuit of professional, artistic and philanthropic passions.

The Old Model of Retirement

The model of retirement that has existed up until now is an outdated and unhealthy ideal. Retirement as our grandfathers knew it was the few years after mandatory retirement, when you lived off a measly pension and social security. During the remaining few years, health and activity dwindled. If you were lucky, you died before having to go into a nursing home. You tried to squeeze in as much travel and golf as you could afford or tolerate. Much of the focus was on the grandchildren and a slow lifestyle. Although this is an overgeneralization, it is given to make a point. The demographics of our society have changed rapidly. This vision of retirement is outdated, and we should consider what the future will look like and model our retirement plans accordingly.

The Future: Financial Independence

The lifecycle is no longer school—>work—>retire, This old model is being replaced with many more links in the chain that include going back to school or training for something entirely new. The emerging trend is a different idea of future lifecycles. It may involve a new career or business. Many people are trying to meld their interests and passions into their post-retirement ventures.

More and more people are living active lifestyles well into their 80’s and 90’s. For some, it is a choice to remain active; for others, it is because they have provided insufficient assets and must work to supplement their income.

Not only is an active lifestyle a preference for many, it is also being proven to be more healthy. The more actively our minds and bodies are engaged, the happier and healthier we are. The more we are involved in pursuits that contribute positively to the world around us, instead of leisure and self-centered pursuits, the more joyful and happier our later years will be.

For active seniors, pursuing new ventures in their later years can be a journey of endless growth, fulfillment and exploration.

The Financial Challenges

The challenges to becoming financially independent are greater now than ever. Statistics show that:

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Many people are not saving enough so that they can retire between the age of 55–65

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Social Security may not be financially viable for the long term

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Health care costs are escalating, while fewer employers provide post-retirement health insurance. Medicare financial instability may exacerbate this.

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Long-term care costs continue to go up, as more and more people require some assisted care. Medicaid financial instability may also exacerbate this.

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Uncertain investment returns and people living longer are making it difficult to live off accumulated savings.  For example, if you retire in your 50’s or 60’s and live until your 80’s and 90’s you may have to live off of your investments and savings for 30–50 years while not earning an income.

Dreams of Financial Independence

People dream about a life free from financial worries, where their assets can continue to grow or at least keep pace with inflation while they enjoy:

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Extensive travel

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Resort lifestyles

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Second homes

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Boat or Recreation Vehicles

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Helping out with the grandchildren

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Hobbies

Dreams of New Pursuits

Others dreams may not be recreational activities, but they might include one or several of the following:

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Volunteerism—devoting their time to helping others

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Starting a for-profit or not-for-profit corporation—pursuing a business dream they’ve always had

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Venture Philanthropy—using excess assets to fund things that you are passionate about

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The Arts— discovering and pursuing artistic talents that may or may not have been fully cultivated

Summary: How to Get There

The way to achieve your plans is to:

1.   Have a plan.

2.   Utilize trusted professional advisors to implement your plans.

3.   Regularly monitor your progress.

Kent E. Irwin is CEO and founder of eFinplan, LLC. He is also a Chartered Financial Consultant (ChFC), a Chartered Advisor in Philanthropy (CAP) and a Chartered Life Underwriter (CLU). He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . For more information about eFinplan, visit eFinplan.com.

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