So, how much money do you need to retire?
That is a Question that is going to affect each and every individual differently. I personally believe that rather than focusing on one number, say $1,000,000.00, is the WRONG approach and here is why.
This one number poses 2 problems.
- 1) The $1,000,000.00 is a finite number and can only go down from there, as you are not adding to it.
- 2) The second issue is that once you start pulling monies out of the $1,000,000.00, the amount continues to shrink, and any compounding of growth is now lost, unless the growth amount EXCEEDS the amount being withdrawn.
So, if a certain number of cash isn’t the answer, how much money do you need to retire?
I think we need to approach the subject in a different light. I think we should approach the retirement question from a cash flow perspective.
But isn’t Cash Flow, just for businesses? Not really as I believe we should run our lives as businesses.Plus, always inspecting the cash flow.
If we always have money coming in then we shouldn’t have to wonder, if we have enough money to retire on, or the question, of how much money do you need to retire?
So say you have a need each month, or expenses, of say $4000.00 per month.
So, you would need at least $4000.00 a month to live on. But you say that’s just great, where do I find an investment that pays a cash flow of $4000.00 a month in this 1% world of investments?
Trust me you will not find those investments in the tradition sense. You will not find these from a Mutual Fund Manager, who sells investments. As he may promise you “over the life of this fund it has averaged a return of 8%.
Ok let’s go back and do the math.
If you are pulling out $4000.00 a month or $48,000 a year and you are averaging a 8% return, so some months you will have a positive return and some months you will have negative returns. My point here is you are going too inevitably start eating away at the principal and once that starts it’s only a matter of time before the money is going to be gone.
Let’s say instead we took that same $1,000,000.00 and invested it in a cash flow investment that the stock market offers, but almost NOBODY knows about it.
As the investment produces CASH FLOW month after month, regardless of whether the stock market goes up or down. Well if this is such a great investment why haven’t I heard about this? Probably because your average financial professional does not offer this (mainly because they do not sell such).
Plus your local Scott trade or E-trade brokerage office probably would say this type of investment doesn’t exist.
It does and most of those individuals probably have never heard of doing such.
Its just one way to start pulling a monthly income out of the Stock Market in the form of a CASH FLOW investment.
This is just one of the strategies I am currently using.