This site is all about optimizing your finances. The main goal is to show the reader the best way to run their finances. I noticed that most people run their finances very informally and not like a business. Many people invest haphazardly without much thought about the fees they’re paying. People pay their bills without negotiating lower rates. A lot of folks don’t know that they can get more money out of Social Security if they plan their claiming strategy ahead of time. I want people to implement retirement hacks to increase their income throughout retirement.
What Is A Retirement Hack?
I want to change all that. I want people to run their finances like a business. And I’m not just talking about keeping a personal income statement and balance sheet. This is one step, and of course, the first one you want to implement. After all, what gets measured gets improved. But there’s more. I want people to take advantage of optimizations. I call them Retirement Hacks. A hack is a tactic used in order to get things done quickly and achieve bigger goals. They’re usually not the mainstream way of doing things either. Working for 40 years and contributing 6% of your gross salary to a 401(k) is not a hack. This is too mainstream, hackneyed, and unimaginative. You’ve heard all the standard retirement investment advice. It’s boring.
Retirement hacks are big things that you can implement in order to achieve real results with your money. No clipping coupons or urging people to skimp on their favorite beverage each day. No preachy advice or anything. Instead, I like a data driven approach that shows you how to achieve the greatest results with the least amount of effort. The CEO of Netflix published a slideshow about their culture a while back. One of the slides says that Netflix doesn’t value hard work. Instead, they reward top performers, even if they put in minimal effort (see slide 35). This struck a chord with me and the more I thought about it, the more I realized that Netflix is right: hard work doesn’t matter as much as people think. You should handle your finances the same way: focus on the results.
Why Retirement Hacks Matter
Results matter when you’re managing your finances. Which would you rather have happen? Would you rather work very hard giving up your daily latte and save $100 per month or would you rather refinance your mortgage and save $100 per month indefinitely? Of course saving $100 per month by doing one thing that isn’t even painful is the way to go. It’s faster and has a long lasting impact. Giving up your latte requires discipline and pain. It’s hard to do. It actually feels like work. Finding the big things in life that generate the highest financial impact makes the most sense. That’s what retirement hacks are all about.
Retirement hacks also matter because most people haven’t saved enough for retirement. Retirement hacks allow you to make the most of what you have, even if you think it’s not enough. You may be surprised by how much more you can get in retirement if you implement a few hacks. One of my goals for soon-to-be retirees is to double their retirement income. If someone is planning on receiving $2,000 per month in retirement, my goal is to show them ways to get $4,000 per month instead. Seem like a lofty goal? It is, but by going through this process, you think of creative ways to expand your income.
Do I Need Retirement Hacks?
You might not choose to implement all retirement hacks. You might not feel that some hacks are worth the hassle or risk. There’s one variable that tells you how much risk you should incur: your financial objective. What do you need your money to do and what’s going to get you there based on your current assets? If you have $5 million and your goals is to simply pay $50,000 in annual expenses, then your strategy would be to conservatively invest in 1% T Bonds with no risk. You wouldn’t want or need to put all your money at risk in the stock market. You wouldn’t need to take money out of your home to invest in income generating ventures. It’s a different story if you only have $300,000 and need to generate $50,000 annually. You’ll have to think creatively to figure out ways to get more money.
You need retirement hacks if you need more income for retirement or you’re not meeting a financial objective. You don’t need retirement hacks if you generate enough income to meet you retirement expenses and are meeting all of your financial goals. You may choose to implement one retirement hack and not another. You may decide that you need to run with a couple different hacks.
Examples of Retirement Hacks
1) Taking cash out of real estate and investing the proceeds. Check out the cost benefit analysis for your specific situation to see if it’s right for you. You can also download this spreadsheet to see how much you’re losing by not investing your home equity. This hack isn’t for everyone. It only makes sense if you can afford to carry a mortgage in retirement. Some folks need to have their house paid off for various reasons. It doesn’t have to be an all-or-nothing decision either. You can take a small percentage of your equity out to invest.
2) Lower your earned income while maximizing your passive income. Earned income is taxed out the wazoo. Meanwhile the fat cats that earn passive income pay next to nothing in taxes. You need to be more like a fat cat and stop working so hard. Shifting your income to passive from earned is one of the best ways to lower your tax bill. It may be easier said than done though, right? Even if you’re only income is from a W2 job, you can still set up your portfolio to be tax-free today. Then the tax planning decisions you make in the future should be aligned with your new goal of being taxed at the lowest rate.
I’d like to know what kind of retirement hacks you’re implementing to generate more income in retirement. What source of income provides the greatest amount of money? What is something you need to work on to generate more income? What is your current tax rate and do you have a goal to lower it?