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Aim for financial freedom

You no longer have to depend on active income to meet your lifestyle expenses.

Retiring early may seem ideal but it has its issues. You need to make substantial savings during your working life to provide for retirement. You also have to find productive activities in order to keep yourself engaged.Therefore, early retirement may not be as good as it appears to be. So, why not aim at achieving financial freedom instead?
Financial freedom is the state where your passive income is enough to take care of your lifestyle. By passive income, we mean interest on fixed deposits, rental income on your real estate investments, dividends and realised capital appreciation on equity investments.You could achieve financial freedom at age 50. But achieving financial freedom does not necessarily mean you should stop working.Working after you achieve your financial freedom has its benefits.
 
For one, you do not have to withdraw money from your retirement savings to meet your living expenses, as is the case with early retirement.The assets can earn returns until you stop working. This reduces longevity risk — the risk that you will outlive your investments.
 
Non-monetary benefits
For another, working has non-monetary benefits as well. Your cognitive aging slows down when you are gainfully employed.Studies have shown that when you do not actively engage your brain, you tend to lose your mental faculties. That said, achieving financial freedom at 50 is difficult. Assuming you started working at 22 and hope to live till 90, you have 40 years of retired years as against 28 years of working life.That means, for every one year that you work, you need to set aside money to approximately sustain 1.5 years of your retired life.If you experience poor investment returns during the early stages of your retirement, you may not have enough money to sustain your post-retirement living.
 
Associated risks
This is because it takes more effort to recover lost capital than it takes to give up gains in the investment account. This effect is magnified because you have to withdraw money at regular intervals to sustain your post-retirement living. In turn, the risk is that you could outlive your investments.
 
Finally, earlier you retire, more likely you are to face health-care issues after age 70. Working is not just about earning money; it can also provide meaning to your life.This can slow down your cognitive aging and, perhaps, reduce your medical expenditure too. You should, therefore, aim to achieve financial freedom instead of wanting to retire early.Achieving financial freedom and continuing to work reduces pressure on your investment account, as you will depend only on passive income to supplement your lifestyle needs till you retire.