Thinking of retirement

Retirement should be a period when you have the capacity to increase a big fraction of your net worth without having to exchange your labour. But we all know that once one retires, he or she will receive a pension which will reflect a drastic drop from the current income. So if you are thinking of retiring — think again.
Do yourself a favour and compute whether the pension and the cash flow from your investments, if you have any, will cover your current expenses and lifestyle you currently enjoy. Compute the cost of your current lifestyle and that of your dependents. Include the home budget and its related costs. Fast forward to the future and consider the financial implications of the time when you are not active i.e. when you retire. If you find that you don’t have enough cash flow from your pension, assets and investments to finance your lifestyle and if you still have loans to pay — don’t retire yet.
But if you have assets that deliver capital gains, income or dividends and are much higher than your expenses, then go ahead and retire. You will attain one of the most important things in life – time. Free time, time to go places, time to be with family, time to treat yourself, time to exercise, time to socialise, time to do anything you want without actively working.
But if your calculations do not add up, it is high time you defer your plans to retire and make new plans with a longer time horizon. Avoid your extravagant lifestyle. We often make justification for the extras that we purchase. It is easier to make excuses as opposed to managing finances prudently. The more you spend the further away you get from your goal of retirement. If you are not an ardent saver, you could consider adopting this habit as a start towards your retirement goals. Every time you put aside a percentage of your income for future investment, you are edging closer to your good retirement life.
Don’t be deceived by your current comfortable financial situation. Many of us are tempted to believe that we are doing well financially if we earn a good salary which can cover our cost of living, own a house, and can service our personal debts. Whenever you get tempted to find comfort with your current financial situation, think of your retirement years. If you have an open mind and are ready to drop the poor money habits, your savings will translate into being able to acquire assets that generate passive income that takes you closer to your goal of retirement.
As you continue to earn your salary, work on increasing your earning capacity so that you can derive income from several sources other than your primary work. At a personal level and on daily basis, preoccupy your mind on pondering whether you can retire and when. Good Luck!

Nizar al Musalmy
nizar.nmh.musalmy@gmail.com