Would your rather be financially independent or retired? Would you rather have retirement cash flows or retirement income? There is a difference.
One of the financial advisory industry’s best thought leaders these days, Michael Kitces, successfully argues that the term “retirement” should be banned from financial advisors’ vocabularies in lieu of the term “financial independence.” In his words, the “point of financial independence is simply to recognize that, once sufficient assets are accumulated, the decision about whether, where, and how much to work, can be made independent of the financial ramifications of the work itself.”
However, it goes beyond just what you will do in that retirement phase of life. It is a transition of replacing income from work with cash flows from assets and other sources. This opens the door to having a part-time or lower-paying “financial independence” job you enjoy that still generates retirement cash flow and adds meaning to your life. This may mean a lower “number” calculation (from Chapter Four) than the “cold turkey” model of conventional retirement thinking.
In the Confident Retirement Journey, I explain the concept of “financial independence assets” and I use the phrase throughout the book. In fact, I even include them within the Confident Retirement Journey Balance Sheet. ™ However, I now realize that I used the word “retirement” too many times. Nevertheless, my book strongly argues for the mindset of “financial independence” and “retirement cash flows,” especially when Chapter Two (What is Your Retirement Vision) is taken seriously.
Who wouldn’t want to be financially independent with good retirement cash flows? That sounds a lot more fun, liberating, and secure than plain old retirement and retirement income!