We all strive to leave the workforce with more cash flow than when we started. However, along the path to retirement, life happens.
We hit multiple recessions, lost jobs, had children, paid for college, and bought a house. These events can derail our retirement dreams, but only if we do not fully flesh out our plan.
We’ve come a long way in our Middle-Class Investing Series (101, 102, 103), so we are ready to step it up a notch. Before we can start building our passive income streams, we will need a solid retirement plan.
How We Plan to Retire on Dividends part 1
What is a retirement plan? A retirement plan is more than saving in a 401K. It is an all-encompassing plan wrapped around your major dreams and ambitions.
Let’s take my retirement plan: I plan to split my time between living in a small American town and overseas. I want to make at least $10,000/month in retirement income and another $10,000 from passive income, such as rents, royalties, and dividends.
My primary source of retirement income will be my military pension, with some TSP money after I turn 60. I also have a Roth IRA that is growing tax-free.
Why is a retirement plan vital to your lifestyle success? You can’t move forward with saving, investing, and passive income if you don’t have a dream.
TAP Your Home Equity
It is hard to save if you want to buy the latest vehicle and have a $1,000 payment? I read an article recently where a couple had $150,000 in automobile loans—this is crazy.
So let’s start building your retirement plan, then we can focus on your retirement income. Here are some questions you must answer to begin your journey.
- Who do I want by my side during retirement?
- Where do I want to retire (big city, small town, overseas)?
- What do I want to live in during retirement (big house, tiny home, mobile home, RV)?
- How much do I want to help my children (college, buying a home, wedding)?
- What do I want to leave for my legacy (generational wealth)?
Notice I didn’t ask what you are receiving from your inheritance? Those things should add to your plan but not be part of your planning process. The more ownership you take of your plan, the better your results.
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Getting started with retirement income. Now, it is time to review your retirement income. While some terms and accounts may look similar to investment accounts, your retirement accounts will differ slightly.
Investing in the markets is tough if you worry about your future. This means that your retirement accounts may be more conservative.
Some retirement accounts include 401Ks, traditional IRAs, Roth IRAs, life insurance, pensions, annuities, health savings accounts, and 529 savings (for your children).
These accounts require a different mindset than when we are building income investing portfolios or starting a business.
Don’t Gamble with Retirement 2
The goal is to build these alongside our passive income endeavors—allowing us to move full-steam ahead with our other plans and not worry about being thrown on the street.
It takes a lot of money to plan retirement. Nobody ever told us that the American Dream costs $5 million. Most of us started well behind the power curve.
Even the idea of funding your retirement, buying a home, and paying for your kid’s college tuition is more than most people can fathom.
But go ahead and write everything you want to accomplish down. This will lay the foundation of what automated business, content creation product, or investing method you can use.
Become Insanely Productive During the Magic Hours
You may not need to start a full-blown business if you have a solid retirement plan through a pension. I have a decent military pension coming my way, so I can take the time to start a creative content blog slowly.
However, if I didn’t have a military pension, I may need to take more chances with an automated business such as vending machines, rental cars, or a community farm.
Putting a price on retirement. Most people like to put a price tag on retirement with a lump sum—say $1.5 million.
Good Debt vs. Bad Debt
However, I love to use passive income to gauge my retirement income. I can give myself levels of comfort based on how much passive income I receive.
- Survival- $5,000/month
- Comfortable survival- $10,000/month
- Ability to travel freely- $15,000/month
- Ability to help kids- $20,000/month
That’s why I wrote two articles in the “You’ll Need $20,000/month in Passive Income” series. However, with inflation, these numbers will continue to rise. Luckily, the compounding effect will keep increasing your income over time.
Retirement income should cover your survival needs. If you decide that your survival will cost $5,000/month, use your retirement income to cover those expenses.
Do I Need Lots of Money to Start Investing?
Your survival income may come from your 401K or a Roth IRA. Be warned that $5,000/month equals having $1.5 million in the bank (at a 4% yield).
Don’t forget that social security may be a thing, but I would not rely on the government for this aspect of my life.
If $5,000/month seems unrealistic, you have to exercise different options. We will get into those later in the series, but you have things like content creation, blogs, and renting rooms to get you over the hump. You can start producing content with no money at all.
No Freeakin’ Way I Am Working Another 25 Years
Conclusion. Your first step is answering the above questions. Then, you will need to decide if you want more money during retirement or less.
Common wisdom in American retirement planning is to assume you have less money during retirement. I know that I want MORE cash flow during retirement than today.
Should You Buy a Property in a Small City?
I want my income to increase every single year. Therefore, I am putting things in motion that grow with the times. Dividends, royalties, and rents, consistently help my bottom line.
Start working toward your retirement survival number; this will push you in the direction you need to go for passive income.
But you also want to dream BIG. Do not settle for living on $4,000/month because it sounds easy. Shoot for $20,000/month, and you will achieve this goal. It’s all in your mindset. Good Luck.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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