Four Steps to Reaching Financial Independence

A successful fishing trip means different things to different people. It could mean simply enjoying time on the water with friends or catching a 300-lb bluefin tuna. Similar to measuring a successful fishing trip, everyone has their own definition of financial independence.

Regardless of what you specifically equate it to, financial independence generally refers to one’s ability to feel confident and secure in their finances. Achieving financial independence isn’t impossible, but it does require planning. As you evaluate your financial goals and plan for your future, consider these essential four steps.

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1. Evaluate How Much Money You’ll Need to Retire

Retirement is arguably the biggest financial milestone you’ll reach in life. But how do you know if you’re ready? Retirement planning can be tricky because it’s difficult to know how much you need when you don’t know how long you’ll live. How can you accurately plan for something when you don’t have the answer to all the questions? How can you ensure your retirement savings won’t run out if you live longer than expected?

When evaluating your retirement income needs, it can be helpful to work backward. Estimate your retirement expenses and, from there, determine how much money you’ll need each year. Many experts agree that the average retiree will need to replace about 80% of their income in retirement. Based on your current income and expected expenses in retirement, what does this amount look like to you? How much does it add up to per year and what’s the total you may need should you enjoy a 30-year retirement?

2. Determine How Much You Need to Save to Reach Your Retirement Goal

While it’s impossible to know exactly how much money you’ll need to retire, you can estimate a ballpark figure. Let’s say you estimate you need $50,000 per year in retirement income, or $1.5 million total. Now you can work backward to determine how much you need to save per year by the age you’d like to retire. If you’re young in your career and have 20 or 30 years to save, you may only need to put away 10 to 20% of your income each year. However, if you’re closer to retirement, you’ll need to save more aggressively.

If you’re worried that you may not have enough saved for retirement, there are opportunities for catching up in a hurry. The most obvious way is to save more before you retire. If you contribute to a 401(k), consider increasing that amount by 1% every quarter until you reach a new goal. You may also consider opening a Roth IRA and contributing the maximum $5,500 amount (or $6,500 if you’re age 50 or over) each year.

3. Establish a Long-Term Investment Strategy

Investing has the power to make saving and working toward a goal amount a lot easier. If you were to invest $50,000 per year for 20 years with a 7% return, you could save more than $2 million (not factoring in inflation or taxes). That’s around twice as much what you’d save if you were putting your money away in a savings account.

Establishing—and following—a long-term investment strategy is critical for pursuing financial independence. While it’s easy to get swept up by the lure of active markets and promises of big returns, for someone preparing for retirement, it’s much more appropriate to focus on a long-term strategy. The markets fluctuate every day, and if you try to beat the market, you can cause yourself unnecessary stress and potentially cause damage to your savings.

It makes more sense to develop an investment philosophy based on your goals and risk tolerance, and stick to it regardless of market activity. A 2015 Dalbar study shows how playing the market leads to underperformance. Buying high and selling low due to panic lowers your overall return and may jeopardize your retirement. Instead, keep a long-term perspective and a disciplined approach.

4. Knowing How To Turn Your Savings Into Retirement Income

Beyond determining how much money you’ll need to save now, knowing how much to withdraw each year in retirement can be one of the most overwhelming elements of retirement planning. This includes factoring in your savings, as well as money you’ll receive from Social Security, IRA distributions, and any pensions. There are countless theories and strategies to most appropriately estimate how much you can spend each year in retirement.

One of the more common principles is the 4% Rule. This retirement planning principle works as follows: a retiree household withdraws 4% of their retirement savings in year one of retirement and continues to withdraw at a rate of 4% annually. As their account balances grow, while the withdrawal rate remains fixed at 4%, the annual withdrawal amount increases to help keep pace with inflation. This is just one principle and considerations such as taxes, age, life expectancy, estate planning, and charitable giving can change things significantly. You’ll want to work with your advisor to determine an appropriate option for your situation and needs.

Next Steps

While you may not be able to predict your future financial needs, you can create a plan to pursue financial independence. At Sportfishing Financial Group, my role as an advisor is to help you make sense of all of this and find the best solutions. My goal is to help you pursue financial independence so you can spend more time on the water and focused on your passions.

If you have questions about your retirement income needs or investment strategy, I’d be happy to schedule an appointment to discuss your concerns. Call my office at 949-481-1807 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

Meet Rick

Over a 25-year career in financial services, Rick has helped hundreds of business and personal clients meet their investment goals by developing risk-efficient portfolio management strategies. He holds degrees in Economics and Psychology from the University of California, Irvine.

The water is Rick's second home: He and his family have been fishing Southern California and Baja going on four generations. In the 1940s, his grandmother worked at the Cannery Restaurant in Newport Beach—when it was an actual Albacore cannery. In the 1950s, his father was on the crew that built two of the boats still in service at Dana Wharf Sportfishing.

To schedule a complimentary wealth consultation or to get a second opinion on your financial plan, contact Sportfishing Financial today. To learn more about Rick, visit his website and connect with him on Facebook. To ask a question or get our list of upcoming fishing trips, call 949-481-1807 or email This email address is being protected from spambots. You need JavaScript enabled to view it..