re·tire (verb):

  1. To withdraw, as for rest or seclusion.
  2. To go to bed.
  3. To withdraw from one's occupation, business, or office; stop working.
  4. To fall back or retreat, as from battle.
  5. To move back or away; recede.

I don't know about you, but when I read through the common definitions of "retire," I find them a bit depressing. Recede? Retreat? Go to bed? How utterly defeatist.

It seems that dictionary writers want us to think of retirement as pulling the covers over our head and giving up on life. But you can't really blame Mr. Webster and his peers for this. Not when every other retirement book, advisor, or TV show on the subject is moaning over the abysmal state of Social Security and telling you that the best you can hope for in your "golden years" is to eke out a living in your waning hours. Depressing, depressing, depressing.

Not so, according to our team of analysts and retirement advisors at The Motley Fool's Rule Your Retirement newsletter. We've got a different take on what retirement can mean for us, for you -- and for your family. We're optimists, and we think you should be, too. Here's why:

The first day of the rest of your life
A cliche? Sure. But that's how we think of retirement. When you retire, there's no need to begin winding down your affairs and looking for real estate bargains on six-foot plots. Between the advances in medicine coming daily out of the labs of Biogen IDEC (NASDAQ:BIIB) and Merck (NYSE:MRK) and new discoveries on the way from upstart cancer-fighters such as Entremed (NASDAQ:ENMD) and Biomira (NASDAQ:BIOM), chances are you're going to be around this world for decades after you officially "retire." Why in heaven's name would you (metaphorically) "go to bed" and let those years go to waste?

Rule your retirement
Whether you're already retired, will soon retire, or are a decade -- or decades -- away from that happy day, your first step needs to be to ensure that your retirement will be a secure one. Rule Your Retirement can help with that. Each monthly issue is chock-full of advice from our stable of in-house and guest authorities on the subjects of:

  • How to determine just how much you'll need to save for retirement.
  • How to save and invest to reach that amount.
  • How to properly allocate your assets for growth and maximum stable cash flow.
  • How to protect those assets from inflation, taxation, and market risk.

Today I want to introduce one additional idea for you to ponder as you plan for retirement. It comes in two constituent parts: establishing a "margin of safety," and then increasing it.

Margin of safety
Most investors know Benjamin Graham's maxim to always demand a margin of safety in your investments. It's a principle we advocate at The Motley Fool: Not just buying companies for what we think they're worth but refusing to buy until they're priced considerably cheaper than what we think they're worth. It never hurts to leave yourself some wiggle room in case your initial estimate proves wrong.

Likewise when saving and investing for retirement. We think it's a good idea to build a margin of safety into your calculations here, too. The last thing you want is to assume you need $X and will live Y years after retiring -- and then when year Y rolls around, you find that X = 0 in your bank account!

It's much better to save more than you think you'll need and be pleasantly surprised when you find out you've saved too much. Ah, but once you realize that you've got your own personal account surplus, what to do with it? That's where we get to the second part of the margin of safety concept -- and discover how much more retirement can mean to you than just "going to bed."

Establish a dynasty
That's right, a dynasty -- they're not just for soap operas and Chinese autocrats anymore. Consider the example of individual investor Shelby Davis Sr., who over 47 years of investing, saving, and investing some more started with an initial $50,000 investment and ultimately amassed more than $900 million in assets to hand down to his children. He did this by prudently investing money that he earned but did not need to live on; by purchasing common stocks in quality companies like Chubb (NYSE:CB), Xerox (NYSE:XRX), and Intel (NASDAQ:INTC); and by holding these stocks, by and large, for as long as he lived.

Chances are, if you're like most people who have begun thinking about retirement, you don't have 47 years to work with. So consider the situation of one Jane Fool, born Jan. 1, 1940. She has just retired and, after reviewing her finances, discovers she has $50,000 more than she needs to comfortably live out the 15 years that, statistically speaking, she has left.

That extra $50,000 provides a nice cushion, but it's still probably only enough to keep her fed, clothed, and sheltered for an extra year or two if the statistics prove wrong. Luckily, with 15 years to play with, Jane has an excellent chance of expanding that $50,000 into an even greater margin of safety -- by investing it.

Now take careful note -- in this example, we're talking about investing only the portion of Jane's wealth that she doesn't expect to need. It's only after her likely living expenses have been provided for that she'd want to entrust the "bonus cash" to a stock market that can go both up and down over the short term. That said, consider a few scenarios for how that $50,000 might grow over the next 15 years:

Market returns
If Jane invests $50,000 in a simple S&P 500 index fund, it should, on average, double in value every 7.5 years, growing her nest egg to $200,000 in 15 years.

Market plus returns
However, 15 years is an awfully long time to be puttering around the house, knitting quilts, and feeding cats. What if Jane decides to use the time for something more challenging -- like beating the market? She's got more time to spend on the task than the average 9-to-5 Wall Street analyst does, and she has a community of tens of thousands of Foolish investors here to help her out. What's more, she has about twice the life experience of many of those Wall Street whippersnappers. By investing in the common stock of value-priced, high-quality companies, we think that over 15 years, Jane can achieve returns in the 15% per annum range. Accomplishing that would roughly double the rate of appreciation of her initial investment, yielding more than $400,000 in 15 years.

Dynastic returns
Several of the newsletter teams here at The Motley Fool aim to do even better than that. We strive to emulate the performance of America's most successful investors: Peter Lynch, Warren Buffett, Bill Miller -- and Shelby Davis Sr. We work together with our subscribers in a quest to double our money, on average, every three years. While it may seem a pipe dream, the fact that it has been done before encourages us to aim high. If we succeed, if Jane succeeds -- and if you succeed with us -- the returns would be phenomenal: $50,000 could turn into $1.6 million over 15 years.

Will you need $1.6 million 15 years into your retirement? Almost by definition, we hope you won't. Remember, we'd encourage you to aggressively invest only the cash that is over and above your conservative estimate of what you'll need to live out your retirement in comfort and security. But once you've passed that threshold, why not make the most of the extra to ensure that if you do need more, you'll have considerably more? Even if it's not $1.6 million, returns of $200,000 or $400,000 are still worth shooting for.

And whatever the ultimate profits, even if you find you don't need them, this small fortune you've created will be wealth you can pass on to your children, use to put your grandkids through college, and teach all of your descendants two invaluable life lessons:

  1. Investing really can build wealth, and it's never too late to start.
  2. Retirement doesn't have to be the beginning of the end. It can be the start of a new beginning.

Begin building your own financial dynasty with a free gift from us: a one-month trial subscription to Rule Your Retirement . It costs nothing to start, and if you like the service, we hope you'll remain with us as a charter member. If not, cancel and we'll gladly refund you for the entire unused portion of your subscription. No questions asked. No strings attached. You have our word on it.

This article was originally published on Feb. 23, 2005. It has been updated.

Fool contributor Rich Smith holds no position in any of the companies mentioned above. Biogen IDEC is a Motley Fool Stock Advisor recommendation. Merck is a Motley Fool Income Investor recommendation. The Motley Fool'sdisclosure policy keeps on generating returns, far into retirement.