Most personal finance advisors err on the side of encouraging people to stash more money away for retirement, because most people haven't saved enough for retirement yet. But there are certainly a few diligent savers who continue to work even when they have accumulated more than enough to walk away from their jobs. For aspiring retirees who are well on their way to financial freedom, here are a few points to keep in mind.
Saving too much could be just as big of a problem as not saving enough.
You don't need to spend money just for the sake of decreasing your assets, but it's OK to loosen the purse strings a little if you are already on track to meet your financial goals. Not every expense is worth the money, but there are some ways you can meaningfully spend some of the wealth you've accumulated. Go out with your friends a bit more, reach out to family even if it means traveling and donate to charities that can do good in the world. Spending doesn't just mean getting something new and shiny. There are endless possibilities for how your money can make your life (and those around you) better.
Safe withdrawal rates are based on surviving the worst case scenarios.
The low interest rate environment has many people questioning the safety of the 4 percent withdrawal rate. As a result, many retirement planners are worried that they have to save even more to achieve a comfortable retirement. But remember that the percentage was derived by studying the markets during two world wars, the Great Depression, the high inflation seventies and every bear market in between. Even if you end up retiring at the worst possible time, you can still significantly improve the odds of your money lasting by being flexible with your spending. Plus, there's also Social Security that will provide the ultimate backstop.
Don't continuously tinker with your portfolio.
This is an issue I struggle with from time to time. Now that I have a sizable portfolio, it always seems prudent to tweak the portfolio in hopes of earning a higher risk-adjusted return. I've been successful at making my wealth grow a bit faster so far, but I've also spent a considerable amount of time with this part-time job. I have to remind myself of the beauty of simplicity, and when to stop adding complexity to my portfolio. Having more money always seems like a good idea, but what does a higher net worth actually do for me if I'm already on track to retire comfortably? I'm by no means mega wealthy, but why play the game and deal with all the stress when I'm well on my way to winning the retirement savings game?
Avoid looking at the markets endlessly.
This is another reason why you shouldn't tinker with your investments all the time. Tuning into the noise of the markets will only make you sensitive about every little market movement, making it harder to stay the course. If the emotions of watching wealth go up and down cause you to bail whenever the markets dive, it will be almost impossible to become financially independent. Having an investment plan and sticking to it is one of the keys to success.
Stay motivated to work.
Don't work so much that you become burnt out and unable to complete your financial plan. Your retirement date is a personal choice, but remember that the timing of your resignation can affect your finances for the rest of your life.
Don't make any hasty decisions until you've thought it through with a cool head. Quit only if you are truly ready financially and emotionally.
Financial advisors always tell people to save more, but money isn't the only thing you need to live well in retirement. Make sure you can truly reap the rewards of financial freedom. The whole point of being financially independent is so you don't have to trade your time for money. Don't let your stash control you once you've built a nest egg.
Whoever understands them! No?
"When we are in heaven, our money will still be in the bank."
"We don't seem to have enough money to spend; but, when we are gone; there's still lots of money not spent." - Internet
"We don't live to eat and make money. We eat and make money to be able to enjoy life. That is what life means, and that is what life is for." - Ol' Mallory