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How much do you need to retire?

One of the most common questions we hear from our clients is "How much do I need to retire?" This question implies that a standardized level of assets exists and can be used as a target for financial success. But what is missing in this line of questioning is the difference between financial independence and a successful life.

Setting a financial goal (the “what”) without understanding its purpose (the “why”) is a common pitfall in personal finance because it is based on the false belief that having a certain amount of money equals success. Is the person who accumulated a $5 mm balance sheet but spent very little time with family successful? Alternatively, would you consider the person who enjoyed life but has little left at the end a success? In either case, the answer is inconclusive by simply focusing on the dollar amount.

Rather than starting at a quantifiable amount of dollars, it makes more sense to begin at the qualitative side of the ledger and drill down until you become clear on what matters most to you in your life. But this is easier said than done. George Kinder, often referred to as the Father of Life Planning, provides three life scenarios to contemplate.

  1. Imagine you are financially secure - that you have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything? Let yourself go. Don't hold back on your dreams. Describe a life that is complete and rich and uniquely yours.
  2. Now imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won't ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life, and if so, how will you do it? (Note that this question does not assume unlimited funds.)
  3. Finally, imagine that your doctor shocks you with the news that you only have 24 hours to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did I miss? What did I not get to do? Who did I not get to be?

 This exercise clarifies that assets are just tools – useful tools, no doubt, but in the end ones that neither define purpose nor ultimately determine whether someone lived a "successful" life. The priorities that rise to the top provide a strong basis for determining what a successful life looks like FOR YOU. Only then will the calculations for "How much do I need to retire?" start to have real meaning.

 At Van Hulzen Financial Advisors, we assist our clients to ask the right questions in order to find the best answers. It is a more deliberate, relational-based approach to personal finance. This is the heart of our business.

 Life planning: The three kinder questions. The Physician Philosopher. (2021, August 10). Retrieved December 10, 2021, from https://thephysicianphilosopher.com/guides/three-kinder-questions/ 

Written by author: Brad Nicholson | Financial Advisor, President

*The foregoing content reflects the opinions of Van Hulzen Asset Management DBA "Van Hulzen Financial Advisors" and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.