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From Mark Ford, founder, Palm Beach Research Group: I want you to paint a new mental picture of what retirement can be: a life free from financial worry that includes lots of travel, fun, and leisure—funded in part by active income from doing some sort of meaningful work.
(As I’ve stated before, the No. 1 mistake most retirees make is giving up all their active income.)
There are many ways for a retiree to earn a part-time active income. You could do some consulting, start your own web business, or do any other purposeful work.
How much active income do you need? That’s easy to figure out.
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Determine what you need to spend each year for your retirement.
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Determine how much money you will have in your retirement account.
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Assume you’ll get no more than a 10% yield on your retirement account.
[You’ll be able to get these returns by following the appropriate PBRG asset allocation model for your needs.]
Subtract C from A. That’s what you need to earn.
One benefit of including an active income in your retirement planning is you’ll be able to generate more money when you need to. But the other benefit—the one no one talks about—is you’ll be able to make wiser investment decisions.
This is an important point. When you’re a slave to your return on investments (ROI), you’ll feel pressure to invest in higher-risk propositions. A few of these might work out well… but most will disappoint you. Some terribly.
Making 8% returns on your retirement account is easy to do safely. But trying to make twice that much—that’s something you don’t want to do.
Reeves’ Note: Mark’s team has collated his top extra active income ideas into something we call the “Retirement Income Multiplier.” It can help you earn two to four times your monthly Social Security income. Click here to learn more about it.