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How My Generation Will Change Retirement And How To Stay Ahead Of The Game

23 June 2008 5 Comments

I think that the traditional retirement scenario is flawed. I also think that the future environment in which we will retire years down the road will be challenging and not supportive of such a retirement picture. Because of these ideas, I think the retirement game will change. Like the shift from working for one company your entire life and having a pension to working for numerous companies and funding a 401(k), this shift will completely change how people view retirement.

Why The Traditional Retirement Scenario Is Flawed

The traditional retirement scenario is based on the idea of working every day until a certain age (approx 65 years old) and then quitting work and living off money that you have accumulated throughout your life. I think this is flawed for a number of reasons:

  1. Unfortunately, for most, the numbers do not add up. Most people will not be able to sustain their quality of life without income in their retirement years. Factors such as not saving enough, inflation, and a deteriorating currency add up to many struggling just to get by in the years they are supposed to kick back and relax.
  2. Assuming for you that the numbers do work out, this retirement scenario assumes that you dislike what you do with your day each day because the goal is quitting what you do. If your goal is achieving a certain lifestyle in the later years of your life, why would you trade the best years of your life to achieve that lifestyle? Seems like a crappy trade-off.

How We Pursue Retirement Today

The retirement landscape today is marked by retirement calculators and 401(k) plans. Phrases like “starting early” and “diversification” are common. Our objective is to work hard, fund our retirement plans and hopefully one day we can quit our jobs and live off the funds we accumulated. Our retirement is only as good as the dedication to savings and the return of our investments in our younger days.

What if we didn’t start saving much until later? Or what if we didn’t average the 10% annual return we were promised? Well, your retirement picture gets murkier.

To sum up the current pursuit of retirement, we are focused on a magic number. We strain to save and invest in order to reach this number. This number guarantees a comfortable retirement right? Unfortunately, at age 25, having a magic number I should reach by the time I am 65 is ludicrous. You are so certain of the environment in the future that you can tell me exactly how much money I’ll need 40 years from now? I don’t believe you. There are simply too many unknown factors to be that accurate in a future that far out: inflation, currency issues, war, famine, water shortage, energy crisis, global warming, politics, population trends, etc.

The New Pursuit Of Retirement

Basically, I don’t think you or I can tell me what I will need to retire comfortably as defined by the traditional retirement scenario; therefore, I’m not going to pursue it. Also, I have no intention of trading 40 years of life in my prime for some Tommy Bahama outfits and more golf in my seventies. Now that you know what I will not pursue in my life, I will tell you what I do intend to pursue.

I will pursue different kinds of income. I will pursue both active and passive income, with an emphasis on the latter. Since passive income does not require a major chunk of my day, I will also pursue things in life that I enjoy. Furthermore, since I am doing things that I enjoy, I don’t see a need to “retire” because my lifestyle is already where I want it to be.

Re-defining A Nest Egg

Today, a nest egg usually refers to a collection of assets set aside for retirement. Usually refers to a collection of funds and sometimes includes things such as real estate.

My target nest egg is defined as a collection of income streams. The more passive and the larger the income that an income stream provides, the more valuable it is. With this nest egg, your “magic number” is more complex. It is based upon degree of passiveness, longevity of an income stream, and size of income. For example, a business that requires a great deal of self-involvement, has a huge income stream that is guaranteed for 50 years has high longevity and income size but rates very low when it comes to being passive.

Diversification is often lauded as the key to successful investing.  While I think diversification is overrated when it comes to investments, it has great meaning in terms of income streams for your nest egg.  Search for different kinds of income streams; you never know how long your streams will flow.  For example, blogging may dry up as a solid income stream, who knows?

While I am income stream focused, building up liquid assets and building an investment portfolio is still a great and important thing to pursue. However, I like to think of it as a single piece in my overall retirement picture. Furthermore, maybe these assets should be looked at more as an insurance policy if for some reason you cannot work or your income streams suddenly dry up.

Examples Of Those Ahead Of The Retirement Curve

  • A 40 year old business owner who earns $150,000 a year while the business runs itself. He uses his spare time to fix up and rent real estate. He also has enough time to coach his son’s little league team and take frequent family trips.
  • A 28 year old network administrator who sets up e-businesses in his spare time. He contributes to his company 401(k) in order to maximize company matching. He earns a decent salary, but also earns an extra $3,000 a month through his e-businesses.
  • A 35 year old fashion designer who leverages her passion and expertise in fashion to start a fashion blog. The blog generates a few hundred bucks a month in advertising revenue. She is saving the extra income to put towards startup capital of her own fashion company.
  • A 21 year old college student who started a facebook application development company. He started off making a few hundred bucks a month. Now, he has three engineering students developing for him and earns several thousand dollars a month and doesn’t write any code anymore. He has already maxed out a Roth IRA two years in a row at age 21, and has plans to start other software companies.


  • torbjorn rive said:

    Good post. Yet another reminder that I need an outside, if even inconsistent, revenue stream!

  • GM said:

    I could not agree more with you assessment. People should not just look at 1 number they want to have at retirement. Everyone’s life changes, especially during their 40 years. We all go through the good times and the sometimes the bad.

    Your goal of diversification pertaining to income streams is something that I hope to achieve as well. Just like a smart person wouldn’t have put all his money into the real-estate market a few years back and just like a smart person wouldn’t have put all his money into internet stocks in 2000.

    I see my peers in their early 20’s like me who have a nice talent or hobby that they could easily put to use to earn a little passive income after their day job. But many are too lazy to put in the effort. I wish I had those specific talents, but I do have a few of my own that I am trying to pursue and eventually it will payoff.

  • kevin duffey said:


    I would love to hear about some of the income stream opportunities you are pursuing. Good luck building up your basket of diverse income streams!

    Thanks for the comment

  • GM said:

    I’ll give you an example of one of my friends. Plenty of people pursue photography, but this kid has a nack for it. He enjoys custom editing photographs of pretty much anything and custom framing it. I suggested he look further for potential customers outside of his family and charge a small fee. His response is that its a pain in the butt to do everything and he’d rather do it just as a hobby. I just think he has a huge potential.

  • kevin duffey said:

    Yep, creating a second income stream definitely takes work. It requires you to put forth the effort when you’re tired from your main job! Not always easy!

    I know a couple guys that are doing some very interesting side projects to build income streams that I will write about in future posts.

    Thanks for the example GM.