Most people have a specific amount of money they dream of having at retirement. I hear $1 million all the time — that this would be enough by most people’s standards. I also hear that winning the lottery would do it, although this seldom happens. Sometimes I hear people plan on inheriting a large sum of money. But none of these ideas are very realistic in terms of what retirement is really all about.
So what does it mean to retire, especially to you? Does it mean you stop working at the set age of 65? Does it mean sitting back with $1 million, or does it mean getting old and falling apart?
Let me offer you my definition of retirement:
“To have enough passive income that when I wake up in the morning, I can elect to work or not.”
This definition has some real meat you can sink your teeth into and some attractiveness to it because it is not a monetary figure or a specific age. Let’s face it, some people will not be able to quit working at 65, and some people will not accumulate $1 million, but that doesn’t mean they can’t have a good retirement. Some people want to work until the day they die, if they’re able, and that’s not necessarily because they have to. Some people want to quit work altogether and travel the world. And some want to retire somewhere in between these two. What I try to help my clients see is that setting up methods of creating income out of existing money and resources that they cannot outlive and does not require their active work to generate is what they really ought to be concentrating on, not trying to save a certain figure by a certain age.
What passive income means is different for every person. What amount of passive income would you like so that you could decide to work or not? Not everyone needs a million dollars to feel like they can retire.
To think of being prepared for retirement as only saving a set amount of 
money, such as $1 million can be very depressing, especially when it’s pretty hard, almost impossible to save that million. It’s much easier to learn how to generate passive income that does not count on your activity for its creation.
Here’s an example of creating a retirement using passive income: One of my clients used active income that he generated during his working years to buy a simple do-it-yourself car wash, you know the kind where you drive your car into the bay, put quarters in, and spray down your car with a hose and soap. Taking the profits from that first car wash, he then went on to purchase two more. These car wash locations provide an average of over $12,000 monthly passive income for him, and that’s after what he spends to maintain them. He doesn’t work at any of these car wash locations, he isn’t washing any of the cars himself, but he’s making money off them. Of course, the amount of money he makes varies at different times of the year, and he has taxes to pay and bookkeeping and other maintenance costs to pay but he recently told me that if sold the three locations, he would have about $400,000 in cash. He would have to pay taxes on this amount, but it would provide him a serious chunk of change he could then also live on, if he no longer wished to continue maintaining the three sites.
Trying to come up with $1 million by a set age is pretty hard, whereas creating $12,000 a month from a business activity that basically runs itself is a lot easier. After all, $12,000 a month is $144,000 a year. If you divide $1,000,000 into $144,000 earnings you’ll find you would be making a 14.4 percent rate of return on your money. So wouldn’t you conclude that investing in three car washes with a total value of $400,000 would be easier than trying and save $1,000,000 from your day-to day-work?
Now’s the time to think about defining retirement for yourself. It isn’t about a set amount of money, or a specific age. It’s about determining how you can create enough passive income so you will have the freedom to do the things you want to do once your active working 
years are over. Perhaps you do want to continue working as you get older. Perhaps you want to travel, or spend more time with your kids and grandkids. Perhaps you want to do philanthropic work, or finish your college education. Maybe you want to write the next great American novel, or try to get a book of poetry published. Perhaps you want to sit and do nothing all day. Having the freedom to choose what your path will be in retirement has nothing to do with set figures and ages. It has everything to do with how well you can set up a predictable income that you cannot outlive. Defining retirement for yourself now, when you can explore more options than just working like a dog and trying to squirrel away money might mean the difference between working until death, or free time and fun times. There are so many options for creating passive income that I would love to share with you. Contact me today: peter@moneymastery.com.
Whatever retirement might mean to you, see it clearly, define it in writing and refer to it often so you can track precisely when you will have enough passive income to quit active day-to-day work. Share with me your successes and I will publish on our Website.
