Don’t Save Up Money to Draw It Down in Retiremen

Saving up for a specific short-term purpose is exactly what savings are for. Retirement, on the other hand, is a point in time when you are financially independent. This means that you have enough income coming in to your home to support your lifestyle without requiring you to go to work to produce that income. This also means that what you want to do for retirement (financial independence) is to produce income, not accumulate a pot of savings somewhere like you would if you were saving for a holiday, large purchase, down payment for a house,etc.

How do you create income for financial independence? One way could be to accumulate a pot of savings that produces investment income from interest, dividends, etc. But the simple rule of diversification says you use your current income to produce something of value – meaning something that benefits others. You spread your production in multiple places such as different types of investments, different types of businesses, different locations, etc. And, when the results of your diversified labor are able to produce enough income to support your lifestyle, you are financially independent – you can choose to retire, and you support the economy around you in the process rather than burdening it.

 

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