Retirees have some of the same characteristics as those who are financially free. But I have come to think of retirement and financial freedom as very different things. I view retirement in the United States as a phase in one’s life after they have invested 30 plus years into employment. Retirees may have enough money coming in each month primarily from Medicare and Social Security benefits. As a result, they no longer need to work.
Being financially free is something completely different. I think of financial freedom as building your personal finances so that money will no longer be the driving force behind your decision making. Many Americans, myself included, are working for an employer with the primary purpose of earning a paycheck. If we had enough cash flow outside the monthly paycheck from our employer, we would most likely decide to do something more personally satisfying with our time. For example, we may chose to invest more time with our family, pursue a meaningful business venture, explore an interest with a non-profit organization, or otherwise enhance the community in which we live.
Most people interchange financial freedom and retirement because they tend to intersect during the same phase of life. Many of us are not able to amass enough cash flow to leave our jobs until we can actually retire. I have established a few of my own ideas for the characteristics of financial freedom versus retirement.
Characteristics of Retirement
Characteristics of Financial Freedom
Are you striving for financial freedom or simply coasting toward retirement?
Brian Jaeger is the author of 2million's Personal Finance Blog. For the past 5 years Brian has chronicled his journey to reach his financial freedom goal of a $2 million net worth.