Why women should focus on financial freedom, not retirement!

Women may think of retirement as not working, rather than focusing on what it means to be financially free in retirement.

Many women have thought of a day when they wouldn’t have to work a nine-to-five, but stick to traditional ideas about planning for retirement. For example, they ask themselves:

  • Shouldn’t I take more risks while I’m young?
  • Shouldn’t I take Social Security as soon as I can?
  • What are the others doing?
  • Where are other women like me in their retirement planning?

Let’s dive deeper into some of these traditional retirement planning thoughts.

Financial independence vs not having to work

Have you ever had days when you just feel like quitting your job? What’s stopping you from quitting?

Some professional women, especially black women, are struggling with six-figure student loan debt. Others live extravagant lifestyles that require all their money to fuel. Still other women choose to invest a large portion of their cash in a mortgage.

If you want to pursue your financial freedom, you must go beyond these charges to increase your savings.

I recommend that women seeking financial freedom start by calculating how much they need to save to retire on their own terms. Some may call it early retirement, while others may call it money freedom.

For example, retirement savings plans such as 401(k) impose a penalty on withdrawals before age 59½. If you want to retire before 59 ½, you have to take this into account.

I recommend not saving all your freedom money in a 401(k) account. When women contribute to their 401(k), it’s with money that hasn’t yet been taxed. This means that your money in the 401(k) will be taxed when it is withdrawn after 59 ½.

The total amount you see in your 401(k) account is therefore NOT the amount you can spend. This money will still have to be taxed.

Independence from money vs. working for money

A growing number of women I talk to are looking for the freedom to work in organizations that match their values. Does this sound like you?

What if you could work with a low-income organization because your savings and investments allowed?

Your financial freedom status can allow you to live the lifestyle you’ve always wanted, while pursuing a career that you find more rewarding. Does that sound like a better retirement to you?

Is your current retirement investment aligned with your gender equality and other values? See “Can Women Really Retire Successfully by Investing in Gender Equality?” and “Can women really retire comfortably by investing in gender equality?” »

Invest in alignment with your values can be difficult under your employer’s pension plan. You can most easily accomplish this by using your own IRA and taxable investment accounts through the right custodian and a knowledgeable financial advisor.

Rethinking our language on retirement and time

Listening to a TED Talk by Keith Chen got me thinking about a different perspective. In Chen’s speech, Could your language affect your ability to save money?, he says that as English speakers we discern periods of time. We tend to think in terms of the present and the future.

If that’s true, and it makes the future feel like something more distant and different from the present, it will make it harder to save.

What if women instead chose to express themselves in a “dead-end” language? It can subtly make you feel the same way about the present and the future, and can just make saving easier!

Most women consider buying a house or sending a child to college as short-term issues. Retirement is associated with the future. Often this makes planning for retirement something you can put off.

You can also associate the word retirement with feeling old, less dynamic, needing nursing home care, etc. What if you saw financial freedom as being able to buy your dream house, send a child to college, and travel?

Reframing retirement into financial freedom

What if you knew that having a reserve was the first step to long-term money freedom? Would it make you more enthusiastic about saving money if, instead of calling it an “emergency fund”, you instead called it your “financial freedom fund for the first six months ?”

When you hear the term “financial freedom,” you might think it has to do with being rich. Women may not see themselves in this light. What if you did?

I’ve had clients whose incomes have increased dramatically in a short period of time. For example, what if you started making $50,000 a year and 10 years later you were making $500,000 a year?

Without a plan, it would be easy to live on that income by buying bigger houses, more expensive cars, and taking more lavish trips. This means that you would depend on continuing to earn more and more money to pay for your lifestyle.

Alternatively, you can choose to continue living on $50,000, saving the rest to build your financial freedom.

Looking to find out what you want: financial freedom or retirement?

Knowing what you want is the first step in the journey. What is your vision of freedom of money? Ideally, where would you like to be in 5 years, 10 years, 20 years, etc. ? What trade-offs are you willing to make to achieve your vision?

You may find that once you put pen to paper or a calculator, you are unwilling to make the compromises necessary to bring your original retirement ideas to fruition. You may find yourself changing the target date, the amount you spend, or the amount you save.

These improvements to your plan, however, should boost your confidence in achieving your definition of financial freedom. Remember to consider your personal values, such as women’s empowerment, climate, and racial justice, throughout your financial plans. Through planning, you can incorporate your values ​​into your financial plans.

Please share the news with your friends so that you are not the only woman living financially free!

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