Don't Let This Assumption About Your Retirement Income Stop You From Making Money In Retirement

The basic assumption of much retirement advice is that your retirement income will be fixed because you won't be able to earn any more money.

There is another way to approach personal finance retirement planning, which is based on a different assumption: The fact that you retire from a job does not mean that you retire from the capacity to make money.

Much retirement advice assumes that you will face an uncertain future in which the money available to you is limited by the amount of money you amassed in your earning years. The challenge for retirement planning based on this assumption is to figure out how you can make your money last for the 20-30 years you might live in retirement. Very little retirement advice even considers the single most important skill required to live those 20-30 years beyond retirement age in abundance: how to make money.

The fundamental difference between conventional retirement advice and the vision of a "no money limits" retirement is that you continue to make money in retirement because you take an active role in creating new money.

Compare the idea that you must stockpile enough money to last 20-30 years with breathing. What good would it do to tell yourself that you need to store up enough oxygen to last you 20-30 years?

Or how about food? Imagine storing 20-30 years worth of food in your house, because you can't accumulate any more. You have to be careful to use only a certain amount of the food every day, always worrying that you will use too much. When your stockpile is gone, you are doomed to go hungry.

Both examples are ridiculous. You can't save the air to breathe later. And unless you are living in a bomb shelter somewhere, no one suggests that you need to stockpile enough food to last 20-30 years.

But when it comes to retirement advice about money, the conventional wisdom paradigm changes. Instead of being something that flows, money becomes fixed. And whatever you amass during your "earning years" determines how you will live the remaining years of your life, if you are actually so "unlucky" that you last 20-30 more years.

Fundamentally, it comes down to the difference between earning money and making money. "Making money" is not the same as "earning money."

Making money is a skill that very few of us ever learned as wage and salary earners. When you "make money," you increase the amount of money available by selling something at a profit, not because you get more in your pension or Social Security checks, or from the pitiful interest that the bank might pay you on your savings or CDs.

So many articles about retirement planning describe a consumer's future, when you are retired from your job. Consumers "consume" money. They don't "make" it. As a consumer, you "earn" money from wages and salaries and "earn" interest on investments, but you have not "created" more money.

We live in an entrepreneurial age. People who have businesses understand that money is not only a commodity to be earned and then used up. Money is also a product you can create.

If you have a business, you already know the difference between earning money as an employee and creating money in your business. If you have always been an employee, it might take some getting used to the idea that your future is not limited by the amount of cash you have on hand and the economic decisions of former employers, banks, and governments about how much money you will have in your retirement.

There are so many ways that people retired from their jobs can create more money. They can produce products, invest in real estate, trade Forex currencies, trade in the stock market, write books, and consult, as well as a thousand other methods to make money.

When you know the difference between making money and earning money, you won't have to fear a future limited the amount of money you already have in savings accounts, IRAs, and pensions. And you don't have worry about outliving your money.

It all comes down to knowing how to create money. You will either face a future of money limits or you will understand that you can continue to make money during all of those wonderful 20-30 years you live past your job.

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