financial independence

The Joys of Dying at Peak Net Worth

So much financial advice centers on saving “enough to retire on”. You work hard all your life, put away a huge nest egg, and then withdraw anywhere from 3% to 5% (depending on which study/guru/publication you follow). Then you hope you have enough to last until you die, avoiding a state sponsored nursing facility. All while watching your net worth decline year after year – sometimes a little, sometimes a lot, depending on uncontrollable market fluctuations.

Sound like fun?

Today’s post introduces an alternative (“contrarian” is my name, isn’t it?) to this strategy: dying at peak net worth.

In this scenario, once you reach retirement (or, for those of us who don’t believe in these things, financial independence) , you actually see your wealth grow each year. Year after year, after year. You don’t have to worry about reducing your lifestyle, drowning in medical debt, being a financial burden on your children, or running out of money. In fact, if done correctly, you could leave a vast sum to charity, or bequeath it to your progeny, ensuring the financial stability of those with your last name for generations to come.

That sounds like a lot more fun than worrying about outliving your dwindling savings, doesn’t it?

The secret sauce here is developing income streams– regular checks, every month, that, ideally, continue forever.  And then seeing how big you can make those monthly checks.

So how, you may ask, do I accomplish such a feat, generating a dynasty of wealth for all my successors? My approach is to start by creating enough income to cover your monthly living expenses – then use any excess to spend, reinvest, whatever. You don’t need to save for retirement anymore because the portfolio has you covered.

If you are also more of a builder than a saver (or maybe just, not a saver), I have listed below what I have seen to be the best methods to build up those revenue streams, having them continue to grow until your death and beyond:

  • Savings (least interesting category): not for me; not very motivating or fun for a lot of people. But: it is a path to perpetual growth if you invest it in income generating assets, like dividend paying stocks or bonds.
  • Real estate (my personal favorite): I’ve actually pretty much made a career out of this one, quitting my full time job to buy, renovate, and rent out vacation properties (my current focus is in Joshua Tree, CA). There are countless blogs, books, and advice columns on how to build up a profitable real estate portfolio, but I will save the details for another post.
  • A business – I have a friend who’s grandfather started a fire extinguisher company in 1949 and this family business is still generating a mid-six figure profit every year. And, the family is barely involved in the day to day operations. Starting a business is probably the most rewarding and difficult path to eternal income, but there are shortcuts: for example, buy a franchise and build it to the point where it’s generating a modest income (enough to cover your living expenses), with a manager managing the day to day. It may not be a ton of money, but it’s pretty much passive and perpetual.
  • Intellectual property – hey you creative types: there are countless ways to create a piece of content and sit back and let the revenue roll in. This blog, for example (well, better blogs that actually make money). A book can also create long term revenue streams (“Your Money or Your Life”, initially published in 1992, is still making big bucks for Vicki Robin, nearly 30 years later). Of course, you need to spend some time and effort marketing your efforts, but some of these do tend to take on a momentum of their own eventually.

The upshot to all these money moves is a retirement where you get fiscally stronger every day vs. weaker and weaker. It makes for a more secure retirement, but frankly, also one that’s a lot more fun. 

Have any of you had success with perpetual revenue streams? Are you looking at your savings grow, vs. shrink, even in a post FI lifestage? Would love to hear about it!

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