Helping Mom apply for Social Security — More complicated than it needs to be?

My mother turned seventy a couple of weeks ago. This means a couple of things:

  • First, she’s reached the age at which she can receive maximum retirement benefits from Social Security.
  • Second, it’s time for her to start taking Required Minimum Distributions from her retirement accounts.

If you’ve been reading Get Rich Slowly for a while, you know that these two routine tasks are less than routine for my family. My mother has fought a long-time battle with mental illness. After a crisis in 2011, my brothers and I realized that she could not live alone. We found a highly-regarded local assisted living facility that specializes in patients with memory issues. (Mom has some sort of cognitive disability that includes memory loss, but which the doctors have been unable to diagnose.)

For the past seven years, Mom has lived at Happy Acres in a comfortable apartment with her cat (Bonnie) and her television. When I see her, I often ask if there’s anything more she needs or wants. She assures me that this is all she needs to be happy.

Mom and Bonnie

At this point, Mom struggles with routine personal hygiene, so there’s no way she can take care of tasks like signing up for Social Security or taking withdrawals from her retirement accounts. As her sons, that’s now our job. (And we’re happy to do it.)

You might think that this process would be easy — but you’d be wrong. I suspect that in most cases, getting retirement benefits started is easy, but it’s much less so in our situation. Continue reading

My mom is a millionaire!

When I woke up last Thursday, I thought my mother was flat broke. I went to bed with the shocking realization that she’s a millionaire.

Long-time readers will recall that my mother has struggled with her health for a number of years. She’d been living on her own, receiving ongoing treatment for schizophrenia, since my father died in 1995. Things gradually got worse until in 2010 we three sons had check her into a psychiatric ward for a couple of weeks so she could receive intensive one-on-one care. She seemed fine after that, but a few months later she experienced a crisis. She drove her car through the back of her garage.

Mom's garage

We took Mom to the hospital, but the doctors couldn’t figure out what was wrong with her. When she was discharged, we placed her into a “memory care unit” at a local assisted living place (which I call Happy Acres).

“I’m not sure how we’re going to pay for all of this,” my youngest brother (Tony) said at the time. “Mom only has $20,000 in the bank.”

“We’ll figure it out,” my middle brother (Jeff) said. And we did.

Managing Mom’s Money

Jeff and I gained power of attorney, which has allowed us to manage mom’s accounts and to make decisions for her well-being. Although it hobbled the business, we structured it so that the family box factory channeled some of its profits directly to her care. (Since she owns 60% of the company, this seems perfectly reasonable.)

For the past six-and-a-half years, Mom has enjoyed a pleasant routine at Happy Acres. After a short stay in the memory care unit, she moved into an apartment of her own. I took her to the Humane Society to choose a cat. She loves Bonnie and Bonnie loves her. Mom has a group of friends that she eats lunch with every day. Mom is quiet. She doesn’t say much. But she likes it when we drop by to see her. (To be perfectly honest, my middle brother sees and cares for her more than me and my youngest brother.)

At the end of 2017, Jeff sent me an email. “Mom got a letter from Social Security. She has to start taking payments when she turns 70 in April. I have no idea how to deal with this. Can you handle it?” Can I handle something related to personal finance? You bet!

Last week, I drove down to the box factory to take a look at the paperwork. I opened the envelope containing Mom’s statement of benefits from the Social Security Administration. “It says here that she should get about $2161 per month,” I said.

“Wow!” Jeff said. “That much?” I’m not sure he’s ever looked at his own statement of Social Security benefits before. (Later today, I’ll share how you can check your current statement online.)

“Yes, that much,” I said. “And she’ll probably need to start taking required minimum distributions from her IRA.”

“What are those?” Jeff asked.

“Once you reach a certain age — 70-1/2, I think — you have to start pulling money from your retirement accounts. Here, let’s look it up.” We pulled out her most recent statement from Vanguard.

Mom is a Millionaire!

Our research revealed that mom has $243,400.80 in a SEP-IRA (a self-employed IRA). Running the numbers through the Vanguard website revealed she needs to withdraw a minimum of $8883 per year — or about $740 per month.

Required Minimum Distributions

“It looks like she’ll be receiving roughly $2900 per month in benefits,” I said. “Not bad. That’ll help defray some of her costs. It might actually let us increase her standard of living, too.”

Then something occurred to me.

“Jeff, does the box factory own this land or does Mom own this land?” I asked.

“Mom does,” Jeff said. “Why?”

“Let me look it up on Zillow.” I pulled up the current estimate of the land value for the box factory. Zillow believes those two acres are worth $349,000. Then, for kicks, I pulled up the value of Mom’s house. (She owns a small home on two acres, the home where my father grew up in the 1940s and 1950s.) Zillow estimated the value of that property at $414,225.

“Jeff,” I said. “You’re not going to believe this. Mom isn’t broke. Mom is a millionaire.”

“WHAT?!?” Jeff said.

“I’m serious. When you combine the value of the two properties with the value of her retirement account, she has a net worth of $1,006,625. She’s a millionaire. Plus, she receives rent from the tenants in her house and rent from the box factory. Meanwhile, because she owns 60% of the business, she’s getting a chunk of the profits every month!”

We were shocked. Mom is a millionaire! For years, we’ve believed that she’s broke. Her bank account barely has enough to support her monthly expenses. But all this time, she’s been sitting on a pile of wealth.

Looking to the Future

The sad part, of course, is that Mom isn’t able to enjoy that wealth. She’s not in any condition to travel the world, to enjoy luxury accommodations, to buy fancy clothes. She’s nearly seventy years old and suffering from both physical and mental ailments.

Yes, we can employ that net worth to make sure she receives the best care possible, but she’s not going to be able to have fun the way a seventy-year-old millionaire should have fun.

Mom’s situation also demonstrates why some people do not include home equity when calculating net worth. They understand that money is a portion of their wealth, but it’s also illiquid. It’s wealth that cannot be accessed quickly or easily. So, some people leave it out of their net worth calculations. (My argument is that net worth has a precise definition. I understand the reasons for wanting to leave home equity out of your considerations, but the number you’re calculating is then not net worth by definition.)

In the short term, Jeff and I plan to get Mom’s Social Security benefits and retirement distributions flowing to her bank account. After we see what that cash flow is like for a few months (or a year), we can make more informed decisions about her future. Long term, we’re not sure what should happen. We know for certain that we’ll sit down and have a chat with her to see if there’s anything we can use this wealth for to make her life better.

Mom is a millionaire, after all. She should enjoy her wealth!

Mom and Bonnie

Thoughts on financial and personal independence

Note: This article is from J.D. Roth, who founded Get Rich Slowly in 2006. After a year off, J.D. is once again writing here at GRS. His non-financial writing can still be found at More Than Money.
¡Saludos de Ecuador!

For the past two weeks, I’ve been enjoying my third trip to that seldom-remembered continent, South America. I love this place, and love it more each time I visit. My past trips have been personal excursions for pleasure and introspection. But this trip was primarily business-related. (I am in the Galápagos at the moment, and that’s just for personal edification — unless we count the tortoise photos, which could be used for GRS promotion.)

You see, earlier this year, my colleague Mr. Money Mustache contacted me to ask if I’d like to take part in a chautauqua produced by Cheryl Reed of Above the Clouds Retreats. Of course I would! It’s my policy to say “yes” to requests like this. And so for one week in early September, MMM and I joined Cheryl and jlcollinsnh to present our philosophies to an enthusiastic group of 22 participants, most of whom were women and most of whom had reached (or were well on their way to) Financial Independence.

MMM has already shared his lessons from Ecuador. Today, I’ll share mine.

Note: At my personal blog, I’ve already posted photos of the trip and raved about the non-financial outcomes. This article will be about the financial lessons I took away.

Improving Lives

Cheryl came to Ecuador on a volunteer vacation sixteen years ago. She did physical therapy for poor and disabled children. She loved the country, and was struck by the poverty. Five years later, she bought a 24-acre farm in the tiny community of Santa Elena, a couple of hours north of Quito. She’s tried (and failed) to farm various crops. At the moment, she’s farming coffee. She spends six months out of every year here; the rest of the time, she lives in the States.

Cheryl is passionate about improving the quality of life for the Ecuadorian people, especially those in Santa Elena. She sponsored one local boy through college, and she intends to sponsor more. She donated a laptop computer to another girl who wants to pursue a degree. And a portion of the “profits” from our week-long retreat will all go to Project One Corner, Cheryl’s charitable organization that works to improve her tiny corner of this planet.

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Some of the “profits” from our retreat will help families like this in Santa Elena.

Moved by Cheryl’s dedication to her community, MMM, jlcollinsnh, and I all donated our speaking fees to her cause. She used $1,500 of this money to help the above family rebuild their tiny home, which was severely damaged in an earthquake last year. This family of fourteen has been living in a chicken coop since then; with the money we contributed, they’ve been able to make their home livable once more.

During the prep for the chautauqua, we talked a lot about financial equivalencies. “The $1,500 we gave to that family is an espresso machine for some people at home,” MMM observed. “When I see that somebody needs help, and I see that I could help them with just half a day’s work, well I can’t say no.”

“I know,” Cheryl said. “At the end of our retreat, we’ll have a nice dinner at a restaurant in Quito. The first place I contacted wanted $42 per person. I couldn’t do that. That’s $1,200. That’s almost as much as it took to fix up that family’s house. I chose a cheaper place instead.”

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The “cheaper” farewell dinner was still lavish and fun.

Converting to Mustachianism

Prior to this week in Ecuador, my exposure to Mr. Money Mustache’s philosophy was limited. I admired his presentation on how to blog last year at the Financial Blogger Conference, and spent an hour talking with him after he’d finished. But I’ve had more contact with Mrs. Money Mustache since then. (“She likes your writing,” MMM told me on the plane form Houston to Quito. “You’re all warm and fuzzy and not a bossypants like me.”)

But after spending ten days with MMM, I’m a convert. I’m in the process of reading his blog from start to finish. (You can too!)

A short summary of the Mustachian Way: MMM believes that this whole “get rich slowly” business is BS. He advocates getting rich quickly — but not through any magical means. The core of his philosophy is adhering to an extreme savings rate. If you can save 50% of your income, you can achieve Financial Independence in seventeen years. Bump that savings rate to 75%, and you can do it in seven years.

“I call this the shockingly simple math behind early retirement,” MMM said.

In general, Mustachianism emphasizes cutting costs. MMM believes that households with incomes greater than $50,000 per wage-earner have no excuse for not building substantial savings. He says it’s still possible to enjoy a luxurious life on much, much less. (He and Mrs. Money Mustache raise a young lad on $30,000 in household expenses.) The problem is that most people have a million excuses as to why they can’t reduce their luxuries. They drive SUVs instead of biking. They have cable television. They buy books and clothes and kitchen gadgets instead of finding low-cost (or no-cost) alternatives. As a result, they choose to postpone retirement until age 65 (or later) instead of retiring at 35.

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MMM shares his Mustachian vision for happiness and lifestyle design.

“The principles on my blog are that you can be happy with less consumption and more hard work,” MMM told me.

He’s absolutely right.

The attendees at our chautauqua were all living proof of what’s possible through extreme saving. Not all of them had achieved Financial Independence, but every single one owned responsibility for their current financial situation. Those that weren’t yet at FI see the path and know what to do. (And, in general, are very young.) Those that had achieved FI did so through extreme saving, careful investing, and optimizing income.

As part of the retreat, I met with thirteen of the 22 attendees. Nearly all of them showed me their financial situation. Most had achieved FI. The average person to have done so was a woman in her mid-forties who still continues to work because she likes what she does. But she could quit at any time and live comfortably for the rest of her life.

What about increasing income? MMM recognizes the value of doing so, but it’s not his focus. “I like to make fun of the ‘earn more’ crowd, even though I think earning more is a good thing,” he told me. “I just think it should be a by-product of being an ethical businessperson. Plus, my secret mission is to reduce the world’s consumption of Stuff, so I focus on that.”

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The entire group flashes the Mustachian Salute.

Other Insights

During my ten days with these fine folks, I didn’t just learn about Mustachianism.

Jim (who is known by jlcollinsnh online) gave a short, sharp presentation on how to invest. In short: Stick as much as you can in index funds, then ignore the account. Let the money grow. Resist the temptation to think you’re smarter than the market.

Jim also talked about the importance of “FU money,” having enough cash in the bank that you’re not tied to your job. Most people have so little saved that they’re tied to their jobs. They have no flexibility. But FU money is the little brother of FI. It gives you freedom to choose better opportunities.

Jim told a story about when he was younger (many, many years ago!), he was working at a job he liked. He wanted to take a few months off to travel to Europe, but his boss wouldn’t have it. “Fine,” Jim said. “I’m quitting.” He had saved $5,000 on a $10,000 salary, and that was FU money for him. Surprisingly, this shifted the balance of power. Suddenly his boss was more receptive to the suggested sabbatical. Jim got to take the trip and then return to a job he loved ‐ all because he’d saved enough to walk away, if needed.

“If you don’t have FU money, you’re not free yet,” Jim said. “And if you have debt, your’e a slave.”

“A lot of people equate saving with deprivation,” Jim noted. “It’s not deprivation. It’s just a choice to spend on the future instead of spend on today.” And debt is a choice to spend on the past. “Saving is money spent on buying freedom.”

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MMM and Amy O. look on as I make some brilliant point

Anita from Chicago — a corporate lawyer — is in her early thirties and just couple of years from being able to retire. How did she do it? Through very Mustachian extreme saving. She keeps her expectations low. “I have everything I want,” she told me. “I just don’t want very much.”

Val — who has been something of a nomad these past few years — has so much saved that she never has to work again. But this week, she just took a job that pays her more than she’s ever made in her life. Why? Because it sounds like fun. Val praised the power of Financial Independence: “FI takes away the wall of worry,” she told me. “You can just do what you want.”

I also enjoyed talking with the folks who aren’t very far along on their financial journey. Lise is a librarian from London, Ontario. She’s scared to invest, so her money is just sitting in a savings account. She’s overwhelmed by the options, and afraid to make the wrong choice. I hope my conversation with her — and Jim’s presentation — helped to remove some of that fear.

Note: My own presentation was about fear, flow (or happiness), and freedom. I talked about making meaning in your life, and about putting your own happiness first. I’ve uploaded the PowerPoint slides for my presentation. I’ll post a written version soon. It’ll appear at my personal site — or maybe at MMM’s site, if he’ll take it as a guest post.

I particularly enjoyed the time I spent with Jesse Meacham. Many of you probably know Jesse as the founder of You Need a Budget, the popular software that’s been helping folks for almost ten years. I’ve interacted with Jesse for years, but never met him until now. He’s awesome: a cheerful, open-minded, Crossfitting nerd who tells fantastic stories. He kept us all entertained for hours during cold nights at the hacienda.

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Another night of Story Time with Uncle Jesse — “That reminds me of the time…”

Jesse shared lots of great insights into financial management — and life. Gems like this:

  • Don’t forecast. Live on what you have. If you try to guess how much money you’ll have a month from now or a year from now, you’ll almost always be wrong, and your forecast will inevitably be too high. Forget the future when budgeting. Focus on the past.
  • Keep it simple When budgeting — or doing anything else with money — use the “mother-in-law test”. If you were to teach your mother-in-law to budget (or invest or buy a house — whatever), how would you do it? That’s where you should start with your own finances. Don’t make things more complicated than they need to be.
  • Seek new challenges. Doing new things keeps life interesting, especially once you’ve reached Financial Independence. “I got a puppy a few weeks ago,” Jesse told me. “I wanted a new challenge.” But your challenges might be learning a new language or taking on a new sport. Challenges make life meaningful and keep us from spending money on happiness drugs such as television.

At the end of a week of “crazy rich-person talk” (as MMM called it), everybody felt inspired to continue working to financial and personal freedom. But we also felt inspired to spread the wealth to others. For instance, MMM “hatched a slightly crazy plan to look into buying the 24 acres adjacent to Cheryl’s existing farm to turn it into a permanent gathering point which also generates money for charity.”

As for myself, this experience showed me the power of small-group gatherings. I’ve done a lot of organizing of and speaking at large conferences (such as World Domination Summit), but never participated in something like this chautauqua. It won’t be the last time. I have a slightly crazy plan of my own. I’m going to organize something similar much closer to home. Look for some sort of retreat here in Oregon in late 2014 or mid-2015. I look forward to more “crazy rich-person talk” — this time with you.

What is Retirement?

I just returned from my annual weekend trip to Oregon’s Opal Creek Wilderness area. Every year, I join five other friends to hike into the forest, pitch our tents on the banks of the creek, and sit around the fire talking about life. We drank a lot of whiskey this year, and spent a lot of time at the swimming hole.

Paul and Tim at rest above the Opal Creek swimming hole
Paul and Tim at rest above the Opal Creek swimming hole

 

This year, we also talked a lot about where we’re going in life. All six of us are about 40 years old, and we’re all dealing with career transitions of some sort. We chatted about “talkers and doers” (a topic I hope to write about soon), about building social capital, and about retirement. I mentioned that my wife hopes to retire when she’s 52, and that caused a lot of envy. It also prompted an interesting discussion on Sunday afternoon.

Paul, Tim, and Andrew chatting around the campfire
Paul, Tim, and Andrew chatting around the campfire

 

“How do you define retirement?” Paul asked as he and I climbed into his truck to start the long drive home. “And when do you plan to retire?”

I thought for a moment. “Are those rhetorical questions?” I asked. “Or are you really asking me when I plan to retire?”

“I’m asking you when you plan to retire,” Paul said. “Because in a lot of ways, you already seem retired. You do what you want when you want. You have time to travel and to pursue your hobbies and that sort of thing. Yet when I think of you, I don’t think of you as retired — I think of you as working.”

I had to think about this some more. “I don’t know,” I said at last. “I’m not sure I know what retirement is, and I don’t know when I plan to retire.”

“The thing is,” I said, “none of my family ever retired. Well, that’s not true — my mother’s father retired, but I didn’t know him well. On my dad’s side of the family, the side I really know, nobody retired. Part of that was because so many of them died young. They never got a chance to retire. But I remember that when my grandpa — who worked as a janitor at the high school — when he ‘retired’, he still worked. He didn’t work for money, but he ran a working farm until he was 75 or 80 years old.”

Then I realized I could be clever. If I couldn’t define retirement, if I couldn’t say when I wanted to retire, maybe Paul could. So I asked him. “What does retirement mean to you?” I said.

“Well, to me retirement is not having to do something for money,” Paul said. “If I was working at one thing and wanted to do something else, I could do it and not have to worry.”

“That sounds like Financial Independence,” I said (though I couldn’t capitalize the “F” and the “I” while speaking). “Actually, that’s a good way to look at retirement. In many ways, Financial Independence and retirement are the same thing. They both mean that you have enough money that you can afford to do what you want, right?”

Paul nodded. “Sometimes I think that retirement isn’t about the money,” he said. “The thing I wish I had is more time. I spend too much time doing things I don’t want to do for money. I guess I could have time to do the stuff I want, but to do so would require more sacrifices than I’m willing to make. I’m frugal, but I have limits. If I could make money doing something I enjoy, I wouldn’t have to retire. And that’s what it seems like you do.”

Ahhh…” I said. Now I could see why Paul had asked the original question, why he wanted to know my definition of retirement and when I planned to retire. To him, I was already living the sort of life that he wants when he retires.

Paul continued: “I’ve been talking with Tiffany” — his girlfriend, and my wife’s sister — “and I’ve been wondering: What if I got to a point where yes, I had to work, but I could choose any job I wanted, even if it paid minimum wage? Maybe I could work in a music store.”

“Right,” I said. “I know what you mean. And actually, you’ve sort of hit on something that’s in one of my favorite books. It’s called Work Less, Live More by Bob Clyatt. It’s all about what he calls ‘semi-retirement’. Semi-retirement is like early retirement except that you’d continue to earn money from sort of work. I think it’s much more realistic for most people than a traditional retirement.”

“I’ll have to check it out,” Paul said.

“You know, I’m going to have to write about this conversation,” I said. “And when I do, I’ll add a bit of detail about semi-retirement from the book.”

A bit of detailIn Work Less, Live More, Bob Clyatt explains the advantages of semi-retirement:

 

“With a modest income from part-time work, early semi-retirees may not have to face the dramatic downshifting in spending and lifestyle that so often confronts those who live only on savings or pensions. And semi-retirees learn that a reasonable amount of work, even unpaid work, keeps them energized, contributing, and sharp.”

 

Though semi-retirement is more realistic than early retirement for most people, it’s still not for the faint of heart. You have to be dedicated and work hard to make it happen. Semi-retirement usually requires ample savings, frugal living, ongoing work, exploration, and a sense of purpose.

 

“I don’t know when I want to retire,” I said. “But I don’t think of myself as retired now, though I can see why it might look that way. To be honest, I don’t want to retire. I have purpose now, and I like it. For so long, my life had no purpose, and I think that’s why I struggled with depression. Having purpose has changed my life, has giving me a sense of meaning.”

Paul quickly noted my flawed logic. “Wait a minute,” he said. “That pre-supposes that retirement has no purpose.”

“Good point,” I said. “You’re right. And actually, I think it’s very important for everyone to find some sort of purpose, whether they’re retired or not.”

Just then, we reached the Gingerbread House, our pit stop for lunch. We went inside and ordered our burgers and malted milkshakes (Paul ordered double malt), and as the rest of the group arrived our conversation turned from retirement to more mundane things. Plus, we all hunched over our iPhones, catching up on 48 hours of e-mail and text messages.

Later in the day, I thought more about our conversation. The more I think about it, the more it seems that the traditional notion of retirement is something like a mirage. It’s not real. When I think about the people I know who have “retired”, I see that they’ve really just gently transitioned into some other phase of life, usually pursuing something they’re passionate about.

Ultimately, deciding when and how to leave the workforce isn’t about some number in a retirement account. It’s important for each of us to think about our goals and what makes us happy. So, when will I retire? Maybe if I’m lucky, I never will. I’ll just keep doing what I’m doing because it makes me happy and gives me a sense of purpose.

Financial Independence: The Final Stage of Money Management

This is the last of a five-part series about the “stages” of personal finance. These stories have intentionally been less polished than most articles at Get Rich Slowly. This is a chance for me to think out loud, to explore an idea with you in an informal way.

In February, I wrote that I was entering the third stage of personal finance. As I made my way out of debt and began to save, I had noticed that many people passed through similar phases of financial development. We took similar steps along the way. In my own journey, the progress looked like this:

  • Initially, I was fumbling in the dark, spending compulsively and accumulating debt.
  • Eventually I saw the light and began to repay my debt.
  • After a hard slog, I reached the light at the end of the tunnel: my debt was gone and I began to save.
  • Now I’ve entered new territory. I have a plan, and I’m sticking to it as I reach for my eventual destination: Financial Independence.

Financial Independence is my ultimate goal. It’s the state in which I will no longer have to worry about money. I would have enough saved so that I could do whatever I pleased. But what exactly does this mean?

Defining Financial Independence
One of the underlying philosophies of this site is that different things work for different people. We each have different goals, different strengths, and different weaknesses. Though Financial Independence is the goal for many Get Rich Slowly readers, we each mean something different by it.

In Yes, You Can…Achieve Financial Independence [my review], James Stowers states: “No person is free, in an economic sense, who does not have adequate investment income entirely unrelated to work.” In other words, Financial Independence means that you earn enough from non-work income to fund your current lifestyle. I think this is the traditional definition of the term.

But the classic Your Money or Your Life offers a little more nuance:

When you are financially independent, the way money functions in your life is determined by you, not by your circumstances. In this way money isn’t something that happens to you, it’s something you include in your life in a purposeful way…Financial Independence is being free of the fog, fear, and fanaticism so many of us feel about money.

If this sounds like peace of mind, it is. Financial bliss. And if this sounds as unattainable as being rich, it isn’t.

[…]

Financial Independence has nothing to do with rich. Financial Independence is the experience of having enough — and then some…The old notion of Financial Independence as being rich forever is not achievable. Enough is. Enough for you may be different from enough for your neighbor — but it will be a figure that is real for you and within your reach.

Another view of Financial Independence is presented by George Kinder in The Seven Stages of Money Maturity. Kinder argues that when you understand what you want to do with your life, you can make financial choices that reflect your values. In his view, the final two stages of money management are what he calls Vision and Aloha. (Note that Kinder’s approach contains a spiritual element. He uses language in his definitions that some may find odd.)

With Vision we understand further that money is a conduit through which our souls flow into the world. We have produced as much as we personally need. We discover within us a capacity to reach out farther than we have ever imagined toward meeting the needs of our families and communities. We find no obstacle between what we want to accomplish and what we do.

[…]

Aloha conveys kindness, generosity, at-one-ness, and compassion…We give without expectation of return, understanding that living is giving. We know both the limitations and the power of money, yet money no longer agitates us. We rest calm before it. In that calmness we can serve one another from the natural generosity that lies within and waits to be offered tot he world.

In some ways, Financial Independence is just another term for retirement. Think about it. Most people retire at 60 or 65 because that’s when they have enough saved to last the rest of their lives. If they don’t have enough saved, they continue working. If they manage to save the money earlier, then they retire earlier. When you retire, you’re essentially declaring that you are financially independent.

Moving forward
What will Financial Independence, the fourth stage of money management, mean to me? Will it be a purely monetary state in which I have enough investment income to do whatever I like? Will it be the point at which I have “enough”? Or will it be something deeper, more spiritual, as suggested by George Kinder?

I don’t know. In fact, I don’t know if I’ll ever actually reach this goal. But I intend to stick to the path, working my way through this third stage of personal finance, hoping one day to reach that destination.

Your turn: What does Financial Independence mean to you? If you were financially independent, what would you do? How would it change your life? Is this one of your goals? Why? If not, why not?