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May 8, 2016

Retirement Planning Step 5: Consider Generating Income in Retirement

Image courtesy of WSJ.
The final step in planning your retirement is thinking about whether or not you will generate any income during your retirement. The impact on your retirement date of even a small stream of income can be significant.

Editor's Note:  This post belongs to a series on retirement planning. If you haven't seen it, check out the first post in the series and start at the beginning.

In my previous posts you may have noticed the line in my retirement spreadsheets (available in versions with and without a house) that wasn’t really being used. That line was for retirement income. Up until now I left that at zero in order to satisfy those who think any sort of work or wealth creation whatsoever mean’s you’re not retired, but in this post I will explore the possibility of generating some income in retirement.

I honestly think making a little money in retirement should be part of any early retirement plan, and not just for the obvious financial reasons. I believe it will help prevent boredom and exercise creativity.

I do, however, have a few rules for retirement income:
  • You have to enjoy it
  • It has to be flexible
  • You shouldn’t rely on it for too much income

The rationale behind each of these rules is obvious, and if your retirement work doesn’t follow them, then you may not really be retired.

Your retirement income could take many forms. Selling homemade trinkets at craft fairs or on Etsy, working as a handyman and helping people with household repairs, writing for a website or periodical, running your own website, selling jam, rebuilding engines, part-time consulting, renting out a room on AirBnB, and a million other things.
Once you no longer have a nine-to-five job taking up all your time, you will be amazed how much you have time for, and how much of that can generate income.

I personally have a few ideas on how I might generate a little income after I “retire,” and I think they all follow the rules I laid out above:
  • This blog – I don’t expect to earn $400,000 per year like Mr. Money Mustache, but I’m hoping I can generate some revenue on this website.
  • Starting a business – I am an engineer. I can’t help but tinker, especially on cars. I have come up with a couple designs for car accessories that I would like to try to commercialize. I don’t plan to make it a full-time gig, but I would like to see if there’s a market for my parts. I also have dreams of designing, manufacturing, and selling the ultimate writing utensil (A.K.A. a pen).
  • Part-time job - This idea came from my dad. Not the concept of part-time work in retirement, but a specific implementation. When he retired from his conventional career, my dad started working part-time at the business of a family friend. He doesn't need the income, but he gets a small salary. Most importantly it gives him something to do which he finds interesting, he gets to hang out with his friend, and since everyone understands he isn't vital to operations, he has lots of flexibility with his schedule. That is what I have in mind when I say I would like a part-time job when I'm "retired."
Who knows how much I'll earn after I retire, but let's start small and let's see what impact making $5,500 per year in retirement can have on my retirement date.

As you can see, if I make $5,500 per year in retirement (increasing by 1% annually), I can now retire after 2019, at age 32. That gives me an additional three years of being Fiscally Free compared to my last calculation that didn't include retirement income.

I now have a pretty good idea of when I can retire and some of the factors that will affect that date. While I can obviously keep my head down and wait for 2019, I am going to keep looking for ways to retire even sooner.
I will let you know how that goes right here on Fiscally Free.

Do you plan to or currently earn income in retirement? Let me know how you do it in the comments.

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  1. You know if you get a lathe and utilize Chrissy's artistic ability, you can make and sell nib holders for pointed pen calligraphy (so hot right now).

    1. I'm not convinced there's a very big market for that, but I'll hook you up if I have the resources someday.