Ready For Retirement
How to Know When You Should Stop Saving for Retirement (and What to Do Next)
Drew, a burnt-out, financially responsible 40-something father of two, hopes he can scale back from his stressful job and still be okay when it’s time to retire. James offers a practical and philosophical take as he tackles Drew’s question. He demonstrates how to determine when Drew and his wife will be in a good position to fully retire. He also challenges listeners to assess their spending and saving habits and to strike a balance between planning for an unknown future while still finding fulfillment, freedom, and purpose today.
Questions answered:
How can I determine if I can stop saving for retirement?
What introspective questions should I ask now to help me live well pre- and post-retirement?
Timestamps:
0:00 - Drew’s question
2:07 - Two mindsets
6:08 - Assess current and future needs
7:33 - Projection exercise
11:28 - Working backwards
14:50 - Working 10 more years
18:21 - Back to the initial question
19:47 - Considering growth rate
21:38 - A philosophical question
23:52 - 3 Levers
26:07 - Check spending/saving habits
Create Your Custom Strategy ⬇️
Drew, a burnt-out, financially responsible 40-something father of two, hopes he can scale back from his stressful job and still be okay when it’s time to retire. James offers a practical and philosophical take as he tackles Drew’s question. He demonstrates how to determine when Drew and his wife will be in a good position to fully retire. He also challenges listeners to assess their spending and saving habits and to strike a balance between planning for an unknown future while still finding fulfillment, freedom, and purpose today.
Questions answered:
How can I determine if I can stop saving for retirement?
What introspective questions should I ask now to help me live well pre- and post-retirement?
Timestamps:
0:00 - Drew’s question
2:07 - Two mindsets
6:08 - Assess current and future needs
7:33 - Projection exercise
11:28 - Working backwards
14:50 - Working 10 more years
18:21 - Back to the initial question
19:47 - Considering growth rate
21:38 - A philosophical question
23:52 - 3 Levers
26:07 - Check spending/saving habits
Create Your Custom Strategy ⬇️
On today's episode of Ready for Retirement, we're going to jump into a question from a listener named Drew. Drew is burned out at work. He's been a good saver, he's been a good investor and he's asked himself the question at what point can I scale back from this really stressful job to do something that I enjoy, because I know I've put enough money into investments to take me to where I ultimately want to go? All that's coming up next on today's episode of Ready for Retirement. This is another episode of Ready for Retirement. This is another episode of Ready for Retirement. I'm your host, james Canole, and I'm here to teach you how to get the most out of life with your money. And now on to the episode, and let's jump right into Drew's question. Drew says the following Hi, james, I recently stumbled upon your content and I am very impressed. You're a young guy, but you have a way of gaining near instant credibility through your honest, candid, clearly well-fought out approach. I recommend you to all my like-minded friends, and by like-minded I mean folks who know the key to a rich life is from a balance of purpose, means, relationship and experiences. My question for you is this can I let off the gas on my retirement savings and start to shift from a savings mindset to a you've earned it now go cautiously enjoy it mindset.
Speaker 1:A little bit about me. I'm 42. I'm married. I'm the debt free father of two. My net worth is $2.2 million. $1.2 million is in retirement accounts, $700,000 is in real estate and $300,000 is in cash liquid capital. Of that 700,000, this is a combination of a paid-for house and an investment property. My kids' future college is covered and my wife loves her job, but I am burned out. After 20 years in corporate sales. My wife has historically made $40,000 per year and she just got a new job in her field making $74,000. I have averaged $115,000 per year annually and I've maxed out my 401k and Roth IRA. Our investment property nets $30,000 and current annual expenses are $46,000. Knowing I can't touch retirement savings without penalty before age 59 and a half, do you think I can seek meaningful, if not leisurely, employment at the cost of reducing annual retirement contributions until I can access them after age 59 and a half or 62, when I plan on turning on social security? Thank you, drew. Well, drew, thank you for your question and thank you for the kind words about the podcast, and thank you, of course, for sharing it with friends as well.
Speaker 1:I like this question because, as a financial planner, I see how easy it is to fall into one of two mindsets. The first mindset is you make money and you spend it. Now this is because of one of two things. Number one you just don't have a lot of income. Every dollar you earn is going to the necessities, and so you're living paycheck to paycheck. But you can also have that same thing even with high levels of income, and really that comes from our inability to delay gratification. See this all the time with people who are making higher and higher amounts of income. But as their income increases, so too does their consumption, so too does their spending. And regardless of how much income they're making, they still, believe it or not are living paycheck to paycheck. So that's the first mindset that people fall into. Is that paycheck to paycheck living, sometimes by necessity, sometimes because it simply is a mindset.
Speaker 1:The second mindset is to save everything. Now, if you were raised during the Great Depression or maybe you have parents that were raised during the Great Depression my guess is you are very familiar with this mindset of when you don't know where your next meal is going to come from. When you don't know what the future holds, your natural inclination is to for lack of a better word hoard everything. What does that look like financially? Well, it looks like you save a lot of your paycheck, you invest a lot of your paycheck. You keep your expenses and your expenditures as low as possible, even as you have sufficient income to enjoy a little bit more, to lay back a little bit more. So this survival mindset and a lot of times you can trace it back to being raised in the great depression or having parents that were raised in the great depression and you just adopting their habits it's this survival mindset. And even once that survival is no longer an issue, even when you know you're going to be okay because you have money in the bank, you have investments, you have protection against maybe being out of a job for a long period of time. That mindset never really goes away. And that mindset is the opposite of that spending mindset, the opposite of that paycheck to paycheck type mentality, because even regardless of how high your portfolio grows, of how your income even grows, you don't allow yourself to spend. You just save and save and save.
Speaker 1:And you hear these stories, these people that never really earned a whole lot of money over the course of their lifetime and they pass away and they leave millions of dollars to a library or to family or to some charity. And while on the one hand, that's celebrated, as it should be hey, that's great. You really lived below your means, you invested and saved well. You left a great legacy for those behind you On the other side, you really want to question is that who I want to be? Do I want to be the person that sacrifices the experiences, the things that this money could do for me, my friends, my family, for charity today, all for the sake of passing with more money than I know what to do with Now? Between those two mindsets, there is a better way, and that better way is how do we spend intentionally today as well as save intentionally for the future? And as we start to think about this, this is really exactly what Drew is asking of. Look, I've prioritized savings.
Speaker 1:I don't know all about Drew, but I can tell he's 42. He's got a net worth over $2 million. He has a good income, but it's not as if he has an income that will allow him to save tons and tons of money every year. He and his wife have done a good job of prioritizing savings. They're debt-free, they've raised a couple of children, and so my guess is he's very much in this mindset of save and invest. But he recognizes that and the good thing is recognizing it. That's when you can start to say what do I do going forward, to say, am I adopting the right mindset? Going forward, because what got him here is probably pretty healthy. What got him here is that mindset that prioritize savings and investing and paying down debt.
Speaker 1:That's good up to a point, and it sounds like Drew might be at that point and he's now wondering do I continue living like that, or can I use this financial resource, or use these financial resources I've built for myself to not have to work such a stressful job, to not have to worry about maxing out 401ks and Roth IRAs, to maybe enjoy time with family or enjoy other things that I can't quite enjoy as much when I'm in this high stress job. So here's what you need to do. Whether you're Drew in this position or you're just thinking through your own situation, there's two things you need to look at what you need to live on today and what you need to live on in the future. Let me explain what I mean by that. So look at today. Today Drew said he needs $46,000 per year to live on. Now I don't know if that's $46,000 per year in addition to the income that's coming in from his rental property. I'm just going to assume their expenses are $46,000 per year, though for the family. Debt's paid off, so there's no mortgages, so it sounds like that money allows them to live free and clear and do what they want to do.
Speaker 1:You're also going to want to look at that number for retirement. Now, that might be the same number. It's certainly going to no-transcript, but it might not be. In fact, for most people it's probably a different number. Meaning $46,000 per year today is good, that covers everything. Is it going to be the same number for the future? Now for Drew and his wife, the kids are going to be grown, so how much of that $46,000 per year is spent on kids? Well, that's something that doesn't necessarily have to be part of their retirement budget.
Speaker 1:For a lot of you listening, maybe you do still have a mortgage and in the future that mortgage is going to be gone, so that's an expense you would back out of your budget. For Drew and his wife. They've paid off their mortgage, so that's not necessarily going to be an expense that's gone. Or maybe there's more travel in the future, other expenses that you have to add back in. But really, you need to look at today and how much income do you need to do everything that you want to do, and then look at the future and how much income at that point will you need to do everything that you want to do?
Speaker 1:Let's now walk through this, using Drew and his wife as an example, and we'll walk through it in a way that you can apply the same thinking towards your plan. Start with today. Well, today is simple. How much do you need to live comfortably and I should say it's simple but you do have to go through a budgeting exercise to see what do we spend? Where does our money go? How much do we need coming in to be able to live the life we want to live?
Speaker 1:Drew has already given this number to me. He said that number is $46,000. Well, what you then needed to determine is how much income do I need just to meet that? Just to meet that $46,000. Don't think about saving for the future. Don't think about sending kids to college. Don't think about any of that stuff. Yet Just think about how much income do I need coming in to live on the amount I need to live comfortably today. So $46,000 for Drew. Well, what if Drew and his wife just earned $55,000 per year? I'm just using this as a starting point. I already know that his wife alone is making more than this. He said she recently received an income bump to $74,000. So they're already higher.
Speaker 1:But what we're trying to work towards is we know Drew's wife enjoys her job and it sounds like she wants to continue doing it. Drew does not enjoy his job. It's burned him out, it's stressful and he wants to do something else that's more meaningful or enjoyable to him. So let's just start with $55,000 per year, which is my number, not theirs. Well, after taxes, how much are they actually keeping on that, assuming they're not saving anything? Well, they'll have payroll taxes. So 7.65% of every dollar that's going to pay payroll taxes, which goes to fund social security and Medicare, and that comes out to $4,208. So call it $4,200. And that comes out to $4,208, 7.65% of $55,000.
Speaker 1:Now we need to know how much are they going to pay in federal taxes? Well, if they're bringing home $55,000, or if their gross income is $55,000, I'm going to assume they take the standard deduction, which are 2024. If you're married, filing jointly is $29,200. What that means is $55,000 is their income deduct $29,200, and there's no taxes on that. And then what's left over which is $25,800, that's what is taxed. And of that $25,800, if you look at tax tables, $23,200 is taxed at 10% and the remaining $2,600 is taxed at 12%. So it's a progressive tax system the first amount so their standard deduction taxed at 0%. The next amount, $23,200 for 2024, that's taxed at 10%. The amounts above that are taxed at 12%. If their income was to continue to increase, so too would those tax rates. But when you look at their blended taxes, at least at the federal level, they're paying $2,632 in federal income tax.
Speaker 1:I don't know what state they're in. There may also be state income taxes, but because I don't know that, I'm going to assume they're in just a tax-free state. Just to make this analysis really easy so if we add up their payroll taxes $4,208, plus their federal income taxes of $2,632, then their total tax bill is $6,840. Then their total tax bill is $6,840. If they make $55,000 gross and they pay $6,840 in taxes, they take home $48,160. So why did I go through that exercise If Drew's wife is already making more than that?
Speaker 1:And Drew's also making a bit more, but we know he's trying to take a step back and find a different position? Well, I did that because I kind of wanted to work backwards into what's the income amount needed just to survive today, just to pay the bills today. And what we see is, if they have a combined salary of $55,000, after taxes, that's right, around $48,000. Drew told us his expenses are $46,000. So, as we look at it, that's part one of do you have enough income coming in to meet your needs today? I would say yes, from the numbers that we can see and again, this should never be construed to be specific advice, but just looking at the numbers that we see today there should be enough money coming in to more than cover their needs today. Now the problem with this analysis is, if we're only earning enough to pay the bills today, then we aren't saving enough to prepare for a future retirement, a future where we can live off the passive income from our portfolio and not have to earn any dollars from salary at work. So that's what we need to look at.
Speaker 1:Next. Part one is saying okay, drew and Drew's wife, how much income needs to come in to be okay today, but then we need to add on any potential extra amount that needs to be saved for the future and that's what we can work backwards into. And I think that's what Drew's asking of. Can I take a step back, knowing that I wouldn't be saving as much to retirement as I once did, but am I in a position where that's okay? So let's now look at the future.
Speaker 1:We looked at his current expenses and current income. Let's look at the future. Well, $46,000 per year is the number that drew gave us. Is that number going to be the same in the future whether you're drew or whether you're anyone else? No, it's definitely not, because things will change that number. The first thing that's going to change that number is inflation. So even if expenses themselves stayed the same, meaning we're hey, we're still spending the same amount in groceries and entertainment and travel and property taxes well, inflation is going to drive that higher. So that's the first thing that's going to change is expenses. The second is some expenses might go away. This isn't the case in Drew's example, but maybe that mortgage gets paid off If you do have a home with a mortgage. Still, that's going to drop how much you need to have to live on.
Speaker 1:Maybe the kids are out of the home. Well, are you paying for kids sports? Are you paying for kids food? Are you paying for kids education? Today, those are all things in the budget but won't necessarily be there in the future. Your retirement savings. So today you're probably saving for retirement. You're saving for other goals. That's not something that you have to do when you're in retirement.
Speaker 1:So start thinking what expenses will go away and then, yes, some expenses will go away, but also some expenses will be added. This could be travel, this could be health insurance, this could be hey, you know what we want to save to our grandkids. College funds, we have new hobbies that we want to pick up. So as you start to look at the future it's never going to be a perfect science, but to what degree can you start to understand? What new expenses will I need to plan for and what existing expenses will go away?
Speaker 1:For Drew's example, let's assume that no expenses go away and no new expenses are added. Let's just keep it super simple. Well, we still do need to look at inflation. So, $46,000 per year today is what Drew and his wife can live on. What about in the future? What does that number look like?
Speaker 1:Well, it depends on how much longer they continue working. If we assume 3% per year inflation and we assume that for 10 years, well, $46,000 per year. Today, to maintain that same purchasing power, they would need closer to $62,000. So lifestyle hasn't changed. The things they're buying they're still buying the same number of eggs each week at the grocery store. They're still putting the same amount of gas in their car, they're still taking the same trips, but all those things got more expensive. So it used to cost $46,000. Today, in 10 years, assuming a 3% inflation rate, will cost $62,000. If we fast forward 20 years, still assuming that 3% inflation rate, they would need closer to $83,000 per year to maintain that same purchasing power. So here's what we now need to do with that information. Let's just use the 10 years from now.
Speaker 1:I know Drew mentioned that he might be working until 62 when social security kicks in. For a second I'm just going to say, drew, what if you retired in 10 years? Well, if you retired in 10 years, you would need, drew would need, and his wife would need. They would need $62,000 per year coming from somewhere, so that somewhere is going to be their portfolio to pay their bills, because they're no longer going to have that income coming in from work Now they still will have that rental property and because I don't know exactly how that's going to be included in their plan. Is that money they're going to live on? Is that there's something they're going to sell? I'm going to to keep it fairly simple just exclude that for the time being, although if we're actually doing planning, I would not exclude that at all. That's a pretty significant source of income, but because I don't know what that's going to look like in the future, I'm just going to ignore it for the time being.
Speaker 1:So, going back to Drew's example, we need to know what do they need to do to be able to generate $62,000 per year in income if they want to retire in 10 years? Well, here's the first thing we do $62,000 is how much income they want. They don't want that income to come in and then they have to pay federal taxes or state taxes or whatever kind of taxes. They want that after taxes have already been paid. I don't know exactly what their tax bill will be, but let's just say that in order to get to $62,000 per year, they really need $70,000 per year coming in gross. Just making up that number Now that's not using today's tax brackets or anything, that's just using a round number of 70,000 coming in after taxes leaves 62,000 to use as an example. So that's what we now know. Drew and his wife need $70,000 per year coming in 10 years from now.
Speaker 1:The next thing we need to know is well, how big or how much of a portfolio do they need to have to create $70,000 per year? This is where we turn to withdrawal rates. There's a rule called the 4% rule. I don't think it's a perfect rule. I think there's actually better ways of doing this, but it's kind of the standard rule people will talk about. Take your portfolio value, multiply it by 4% and that's, generally speaking, how much you might be able to spend for the rest of your life from that portfolio and be reasonably assured that you're probably not going to run out of money. So here's what we need to do with that. If you need $70,000 per year, $70,000 represents 4% of the larger portfolio. So if we divide $70,000 by 4%, that tells us they would need to have Drew and his wife would need to have $1,750,000 in their portfolio in order to create $70,000 per year, which, after taxes, would give them $62,000, which is the equivalent of $46,000 per year today, but adjusted for inflation over the course of the next 10 years. Now this isn't exactly right. There's a lot more planning you'd want to do, because at some point social security will kick in to offset how much needs to come from their portfolio At some point. I mean at some point. Today they have a rental property that's generating income which would offset how much they need to have coming in from their portfolio. So just full disclaimer here.
Speaker 1:I'm intentionally ignoring some of those things because that gets into a little bit longer of a conversation. If you're interested in that, check out episode number 160, where I talked about how do you plan for this. That episode's called Avoid this Major Pitfall of Standard Withdrawal Strategies, where I talk about how do you invest your portfolio, or how do you understand how much you can actually spend if, when you first retire, social Security hasn't kicked in, so you have to take out a bigger amount of your portfolio versus when Social Security does kick in? Well, you don't have to take quite as much out of your portfolio. How do you account for that when you're looking at these standard withdrawal rates. So go and listen to that episode if you're curious. Account for that when you're looking at these standard withdrawal rates. So go and listen to that episode if you're curious.
Speaker 1:But just for today's episode, I'm going to keep this super simple and say that $70,000 per year needs to come from their portfolio for the entirety of their retirement. With that now in mind, let's go back to Drew's question. He said do you think I can seek meaningful, if not leisurely, employment at the cost of reducing annual retirement contributions until I can access them after age 59 and a half? I'm going to ignore the accessibility at this point, because another question is okay. Well, if you do retire before 59 and a half, do you have enough money on liquid reserves that you can access and draw down? There are ways to account for that. So I'm going to set that aside for the time being and I'm going to want to answer the question does he have enough money already in his portfolio to not have to save any more for the future? And I say that because of this.
Speaker 1:Drew has $1.5 million combined. He and his wife have $1.5 million combined between retirement accounts and liquid reserves. Well, we just determined that they actually need $1.75 million in their portfolio if they want to be retired in 10 years. Does that mean that he needs to keep saving? There's a gap there of $250,000. That's a pretty significant gap. Well, when you first look at it, you might think that, yeah, until you've crossed that gap, or until you've closed that gap and have that $1.75 million, you need to keep saving. Well, that's the thought process until you take a big step back and realize, wait a minute, he's got 10 years. Until this happens, in all likelihood his portfolio is going to be growing at some rate over that period of time. So how much of that gap is going to be closed by just his portfolio growing versus how much of that gap needs to be closed from them continuing to save to their retirement portfolio?
Speaker 1:Well, here's how I'd look at that. I'd want to know what growth rate is needed to grow a $1.5 million portfolio, which is what they have today, if you exclude their real estate into a $1.75 million portfolio, which is what they would need in 10 years to be able to generate the inflation-adjusted equivalent of $46,000 after tax in today's dollars. Well, if Drew and his wife could grow their $1.5 million portfolio by an annualized growth rate of 1.55% over the next 10 years, that $1.5 million would grow to $1.75 million and that's grown to $1.75 million and we've already done the inflation adjustment there. That $1.75 is to fund the higher living expenses, because we've already taken inflation into account and you think that that 1.55 over 10 years should not be a difficult growth rate to achieve Definitely not guaranteed. But if you just look at history as a guide, it's very likely that even a conservative portfolio in most cases is going to give you at least 1.55%.
Speaker 1:Now, if you get 8% to use a much more growth oriented return and, by the way, me saying 8% is no way a guarantee or even a likelihood of getting it, but just giving some proper perspective of what about a low growth rate versus a higher growth rate If they get 8% per year growth, their portfolio today of 1.5 million would grow to over $3.2 million 10 years from now. So if they need 1.75 and they got anywhere close to this 8% growth rate, they'd have 3.2 million. What this is showing us is hey, drew and Drew's wife, your portfolio is now at the point where, if you keep getting some decent growth going forward and even if you don't make any additional contributions and if your actual expenses are $46,000 per year, you might be don't need to save anything on an ongoing basis to still be on track for retirement. So it's at this point in an analysis that I might take a big, big, big step back and say what is the role of money in our life? Yes, more of a philosophical question of saying don't just shut off all savings. You, you're going to get a 401k match from your employer. Keep saving. If you have excess money that you're not going to spend, well, might as well save it. But at what point is continuing to save? Is continuing to stay in that high stress sales job costing you more than it's hurting you? Sure, the more money you save, the higher your income, the more you invest. All these things help your balance sheet, all these things help your portfolio grow. But if you're staying in a job you hate or if you're sacrificing things that you could be doing today, what's the personal cost just to get an increasingly smaller and smaller financial benefit from doing these things?
Speaker 1:This is where I'd go back to the beginning of what I talked about in the episode. Our mindsets, our learned behaviors we all have them, and it's not a bad thing to have these behaviors, many of which we adopted from our parents or we learned as children or we learned from experiences. To what extent are they helping us in this stage of life and to what extent are they starting to detract from what we might be able to do? Because I look at this situation. I say, look, assuming these numbers are accurate, can you cut way back on work, not even necessarily hours that you're working as much as the type of work that you're doing. Can you focus on getting something, getting some job that you really do enjoy or at least is meaningful or purposeful to you? And then, sure, keep saving to the extent that you want to save.
Speaker 1:But are there things that you could do to enrich your life today with some of that excess income? Because even if you shut down all savings going forward and I keep going back to if these numbers you gave are accurate, because if Drew's off with his estimates of how much he might spend, or if Drew's off on some of these things, well that totally changes the analysis. But using the numbers that we used, this might be a situation where it's yeah, save a little bit, maybe get the 401k match, maybe save any excess, but what's stopping you from taking every excess dollar and spending that on something fun, on giving it away to a cause you care about, on doing fun things with your family or your friends? To say, how do we get the most life out of our money, not just how do we keep growing our portfolio as much as possible so we can die with a whole bunch of money that we never actually got to spend. So, as we go through that, that was for Drew's case specifically, but I want to highlight some key considerations that are relevant to all of us.
Speaker 1:When you look at a situation like this, when you look at your own plan, there's three big levers that are going to determine the financial implications of what you are or aren't on track for how long you work, how much you save and how much you spend in retirement, for example. As Drew's looking at this, if I was going through a process with Drew, I'd say, drew, what's more important to you and I would try to phrase it better but would you rather retire early or would you rather spend a whole lot more in retirement? Maybe quantify that. Hey, drew, if it was the option of working eight more years and continue with their current spending. I'm just making these examples up, but do you either work eight more years and be totally good to keep spending this $46,000 per year, adjusted for inflation, or you could work 15 more years and you could add 50% to what you're currently spending. Which resonates more with you? And why start thinking about that Now?
Speaker 1:How do you play out these trade-offs? What is the priority? Is it more money to do more things, or is it less work to have more freedom? Work's not a bad thing, work's a great thing, and I think that's sometimes a message that gets lost as I'm going through these episodes is I think work is incredible and I think there's a ton of benefits to work. I think we're created to be creative and to work and to be productive at many things. That being said, there is a boundary that gets crossed where we start doing work or we continue doing work. That detracts from our health, that detracts from our relationships, that detracts from the things that we could be doing to live a more full, more enriching life. But finding that balance is important, especially when you're in a position like Drew and his wife, who are in the spot where, financially, if they just let their portfolio keep growing, they maybe don't need to save anything else to cover their future needs. So they can fully look at their current employment, their current savings, our current income and say what can we do with this to enrich the quality of our lives and our family's life? So that's one thing. Or what if you save less and work longer? What if you save more and retire earlier? These are all just the types of levers the big three that I would talk about that can determine how do you start to shape how you live in the future, but also how you live today.
Speaker 1:Financial planning is not just save everything for retirement and hope that at that point things are good. It's prepare for the future, but also live well today and then be honest with yourself. I think this is a consideration for everyone. For many people, it's easy to justify really poor spending and saving habits. They'll just tell themselves and they're lying to themselves. But they'll say, oh, it's okay, I'm going to spend all this paycheck, but as soon as I get a raise, I'm going to start saving. Then, you know, when I get that bonus, that's what I'm going to use to fund my 401k. You know what? Now is the time to live it up. I'm young, I've gotten healthy, I'm going to start saving for the future later.
Speaker 1:Now there is a degree of truth in that of, yes, you want to enjoy where you are to the extent that you can, but you also have to understand there's a very real trade-off for that and that mindset. If you fall on the trap of fully owning that mindset, no amount of income is going to dig you out of it. That's just going to be something that stays with you. You're going to wake up one day wondering why you don't have enough money to retire, and so what you'll start to find is that mindset is really just procrastination against being able to make the tough decisions to delay gratification. And, like I said before some people, their income is very low and there's not much they could do.
Speaker 1:It's not a spending problem, it's an income problem problem. It's an income problem. If you have a very low income and your rent or your mortgage or your necessities are a high percentage of that income, the mindset maybe isn't so much the issue of your overspending. The income is the issue. And how do we focus on driving up our income as opposed to trying to decrease expenses? Now, for others, it's easy to justify the opposite. It's easy to justify another year of work, it's easy to justify putting off the vacation or time with family or things that cost a day, because you're trying to prepare for the future.
Speaker 1:You tell yourself, hey, this is all going to pay off. I'm just going to keep saving, I'm going to keep growing, I'm going to keep working, I'm going to keep investing because that's buying me freedom in the future. And again, there's a kernel of truth in that. But the reality is, the real issue might be you don't know who you are, what you even want to do for fun. For so many of us, we get lost in work and it's okay. Work and deadlines and projects, and raise a family and buy a home and do grocery shopping and all all these things that just take over and that creativity, that play, that sense of who we really are, which again starts to get to a much more philosophical level. We start to lose it, we start to squash that flame and it just becomes going through the motions saving, preparing, telling ourself, lying to ourself that the future will be better, the future will be easier because we'll have the finances to enjoy it. But the real hard work, like I said, is more understanding who are you and what do you actually want to do.
Speaker 1:There's a saying that I'll quote quite a bit on this. It says the hard part isn't doing what we want, it's knowing what we want, and that's a quote by Naval Ravikant of how do we know what we want? We need to know ourselves, and the best way to distract ourselves from having to do the difficult work of knowing who we are is just saying I'm just going to work another year, I'm just going to keep saving, I'm just going to keep growing, lying to ourselves that that's going to put us in a position of freedom, and to an extent it does. But, on the other hand, more money if you don't know what you want to do with it and don't know how to enjoy it, isn't necessarily going to lead to more freedom. So, as we start to wrap up for today, drew, I really want to thank you for that question, because, on the one hand, it is a financial question do you need today and how much income do you need in the future? Combine those two to work backwards into understanding what does your income need to look like today and how do you split that between current consumption and future savings?
Speaker 1:At a much deeper level, though, this becomes a very philosophical thing. It becomes a what do you want your life to look like and how can you design the life? How can you architect the life that you want to build, not just in the future, when you're 65 and social security kicks in, but also today? How do we take the holistic view that looks at everything to work backwards into saying what am I doing with my money today? What am I doing with my income today? What am I doing with my choices today, to make sure I'm optimizing that, both for the future and for today?
Speaker 1:So thank you to all of you who are tuning in, for all of you who are listening. Like Drew, if you have friends that you think would benefit from this, if you have family members or coworkers that you think this would be a good message for them to hear, or this would be a good podcast for them to tune into to make sure they're best preparing for their retirement years, we'd appreciate if you'd share this podcast Now. If you're watching on YouTube, make sure that you subscribe, make sure that you like. If you're listening on podcasts, make sure that you leave a review if you're enjoying the podcast. And, as always. I appreciate you listening and I'll see you next time.
Speaker 1:Hey everyone, it's me again for the disclaimer. Please be smart about this. Before doing anything, please be sure to consult with your tax planner or financial planner. Nothing in this podcast should be construed as investment, tax, legal or other financial advice. It is for informational purposes only. Thank you for listening to another episode of the Ready for Retirement podcast. If you want to see how Root Financial can help you implement the techniques I discussed in this podcast, then go to rootfinancialpartnerscom and click start here, where you can schedule a call with one of our advisors. We work with clients all over the country and we love the opportunity to speak with you about your goals and how we might be able to help. And please remember, nothing we discuss in this podcast is intended to serve as advice. You should always consult a financial, legal or tax professional who's familiar with your unique circumstances before making any financial decisions.