Jacob from Early Retirement Extreme and Mr. Money Mustache from Mr. Money Mustache have recently been talking about the “Internet retirement police”, self-appointed folk who call out bloggers for calling themselves retired, when, according to these people, their lifestyle doesn’t fit into the pre-approved notions of what they consider to be “early retirement”, or just plain ol’ “retirement” in general.
That got me thinking, because we often use the same word to mean different concepts, and “early retirement” means different things to different people. Jacob breaks down “retirement” into the following categories:
“Retired”, as in “put out to pasture”
This is when we’re just too old and tired to do anything productive, so we spend the rest of our days watching TV, playing golf, or whatever else we can muster. This is probably what the reality of “retirement” was for most people in ages past, but it seems like an old-school definition to me and not one that I personally look forward to.
Will this type of retirement still be a reality for people going forward? There are incredible advancements being made in technology and medicine right now, and I firmly believe that, barring a major world war or something of that scale, most younger people today will live to see aging “cured”, and death by senescence will become obsolete. There will still be fatal accidents, crime, and stuff of that sort, but those are different problems, and I believe that we’ll find solutions to those problems as well. There should be no reason that a young person today would find him or herself forced out into the pasture due to plain old age, and by young, I also include people in their 30s, 40s, and heck, maybe even in their 50s. Technology moves fast these days.
“Retired”, as in “free from the corporate grind”
Not everyone loves their job, and many of us would love to be free of the 9 to 5 corporate grind so that we can spend more time with our families and focus more of our attention of the things we really want to do and on the things that actually matter to us.
This is definitely a version of retirement that I definitely aspire toward, and one that I’ve been able to achieve for myself in the last year. I am now my own boss, and I now answer only to my customers. It’s a great amount of freedom, and also a certain amount of responsibility as well, as I am now directly responsible for pleasing people or making them unhappy. This is no longer “somebody else’s problem”, like it was when I worked in a corporation. At the same time, I love having the ability to just take off at a moment’s notice and head somewhere else in the world, without having to ask someone for permission. All I need is a laptop and an Internet connection so that I can keep up to date on things.
I agree with some of the “Internet retirement police” that this version of retirement is not necessarily passive, since at this stage, we might still be obligated to exchange time for money, and we still need to work in order to produce. In this sense, we’re definitely not retired in the sense that we can just goof off all day. However, does that really matter? So long as I have the energy, I definitely enjoy being able to produce and add something to this world, and I enjoy it even more with the opportunity to do it on my own terms. If someone wants to call themselves “retired” in this sense, I will congratulate them on making it out of the rat race, and wish them the best of luck going forward.
“Retired”, as in “I can do what I want, when I want, and how I want”
This is the best version of retirement in my eyes, and it means true financial independence, without the need to trade a significant amount of time for money. It of course depends on what we actually want; wanting to fly around in a private jet will require a heck of a lot more passive income than, say, just wanting to be able to travel around Southeast Asia for a few months!
So, what counts as passive income? Does writing a book acount? Managing a website? Now that I’m wrapping up a 300 page book, I would definitely not consider a book as passive income, any more than I consider my business to be passive. To me, passive income is more about things like index funds or real estate property with low overhead. These investments are bought with money, not time, and they ideally don’t take much time to manage. If I had enough investment income to cover my current lifestyle and then some, then I would definitely consider myself to be financially independent. I’m not there, yet!
How much money does one need to reach this level? It all depends on your life style. If you go for a more extreme version of early retirement, you might be able to get away with $10,000 – $15,000 in income a year. The important thing is that you find the number that is right for you. There will always be grammar police, “retirement” police, and others out there seeking to impose their own standards on you, but what really matters the most is your own standards, and what makes you happy.
Dear reader, what does “early retirement” mean to you, and what steps are you putting into place over the next few years to get there? I’d love to hear from you.
“What Does ‘Early Retirement’ Mean to You?” was included in the following carnivals:
Yakezie Carnival at Making The Life You Want
Y and T’s Weekend Ramblings at Young and Thrifty.ca
Carnival of Retirement at Midlife Finance
Carnival of MoneyPros at The Savvy Scot
Finance Carn. for Young Adults at PF Carny
Carnival of Financial Planning at Making Sense of Cents