The traditional method of funding retirement is to rely on large sums of money that you’ve already saved. This can be stressful and worry-inducing, because if something happens along the way (a job loss, an illness, etc.) you’re in trouble. The New Retirement Method uses your own lifetime income to fund your retirement instead. It’s easier to implement than traditional methods, and has the potential to provide even higher levels of retirement income while keeping your individual risk low. Here are three things that you need to know about it.
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- It’s incredibly simple to implement
Perhaps the most impressive aspect of the New Retirement Method is that it’s incredibly simple to implement. All you have to do is save a certain percentage of your income every month. The catch is that to achieve the level of retirement income you’ll actually need, you’ll need to save at least 10% of your income. So if you earn $100,000 a year, you’ll need to save $10,000 a year.
Once you reach a certain income level, you can adjust your saving rate to meet your needs. If you fall behind in retirement and need to save more, simply raise your contribution percentage up or down to meet your income needs. And if you’re unable to save enough money to reach your desired retirement income level, you can always go back to the traditional approach and use savings to supplement your income.
- You can adjust the New Retirement Method to save more money
You can adjust your New Retirement Method’s saving rate to make the total amount you need to save bigger, smaller, or in-between. For example, say you’re on track to retire at age 65 and need $300,000 to live off of each year. By adjusting your savings rate to 5%, you’ll only need $250,000 a year to live off of, and adjust your spending so you can afford it. Or you could reduce your savings rate to 4% and cut your income level down to $50,000, which you can then live off of with ease.
- You don’t need to invest at all
The third way the New Retirement Method differs from other retirement methods is that you don’t need to invest at all. This method relies entirely on your own lifetime income and not on market returns. That means the amount you have to save and invest is 100% within your control and that you can achieve the maximum retirement income you need with as little as 10% of your income.
Having control over your money and being able to lower your expenses significantly will allow you to reach your retirement income goals. You might still have to spend money on some activities that don’t earn much income, but by spending less on them, you’ll be able to allocate more of your money toward retirement.
No matter how you choose to fund your retirement, having access to a high level of income is critical.
While many retirement income methods and options sound great in theory, in practice most of them aren’t realistic. In fact, most of the traditional methods you hear about will leave you short of your retirement goals.
So this is why I like the New Retirement Method: it’s a viable alternative to traditional retirement income plans that doesn’t require you to rely on outside income. You can get the income you need now while still saving for retirement, and you can adjust your withdrawal rate as needed to adjust to any changes in your retirement goals.