Retirement Planning: The Importance of Knowing Your Number

Retirement planning empowers individuals to assess their future, offering options rather than creating burdens.

### Understanding Retirement Numbers: The Importance of Planning Ahead
* 💬  A question from Jake yt7 reveals a common concern about retirement planning, where some individuals fear knowing their retirement number, viewing it as a **burden rather than a helpful tool**.
* 🩺  The analogy of ignoring chest pains illustrates that not knowing one's financial situation can lead to **dire consequences**, emphasizing the need for **proactive assessment**.
* 📊  Understanding where you stand financially allows you to **identify gaps and take necessary steps toward achieving your retirement goals**, rather than facing **unexpected challenges later on**.
* 💡  Many people find that knowing their number can be liberating, as it often reveals they are **further along in their savings** than they initially thought.
* 📅  Planning for retirement well in advance—ideally **5 to 15 years out**—provides individuals with **more options and flexibility** in adjusting their financial strategies.
* 🛑  Ignorance in retirement planning can lead to a lack of choices, resulting in reliance on Social Security, which **40% of retired Americans currently depend on as their primary income source**.
* 🔑  It's crucial to recognize that retirement doesn't have to mean **giving up on lifestyle aspirations**; instead, understanding your financial situation can help you navigate potential adjustments while still planning for a **fulfilling retirement**.
* 🌱  For younger individuals, engaging in retirement planning discussions can unveil exciting possibilities, showing that even **small changes in spending habits** can lead to **significant long-term benefits**.

[Music] all right um we have a question up next from Jake yt7. It says, I just had a conversation with a work colleague about retirement planning. They told me they don't want to know their number. They are afraid it will be a suffocating chain around their neck. Have you heard this before and what would you say? And I would go so far um, I don't think you think it's a suffocating number around your neck to know your number. No. And so what, what do you think of it as? What is it to you? What a like H. It's like going, well, okay, this is a bit of a, this is a bit of a dire example, but this is the one that immediately like came to my mind. Man, I'm having some chest pains. Oh, but I don't want to go to the, do I? I don't want to go to like find out what. Well, if you ignore that, what's going to happen is if those chest pains are a bad thing, there's going to be a bad outcome that exists there. If you're

Thinking about going to retirement like, Ah, I don't want to, the number, don't want to know if I have enough, don't know if I'm prepared for it. Then what you may be setting yourself up for is a bad outcome when in on the other side of the coin. If you can assess and diagnose and triage early on, Okay, where am I at today? Where do I want to be in the future? Okay, what's the gap? How do I begin to take the steps to get there? I don't think it should be that way. What I've actually found is for most folks, and they know their number, it's a little bit freeing. They get to say, Holy cow, I had no idea that I was this far along. 'Cause what you don't want to do is, and we've seen this, we've had this conversation before, someone say, Hey, I turned 65, uh, you know, whatever, uh, I turned 65 in two years, and I'm going to retire. We'll be like, Okay, great, that's awesome. Why? Why 65?

I'll be Medicare age. Okay, awesome, great. What's your burn rate? How much you spend? Don't know. Okay, well, let's ballpark. Well, I know my paycheck is this much, and so I got this much left over, so I think I spend this much. Okay, great. When you retired, do you want to live at that same lifestyle, or do you want to live differently? Well, I want to do the same thing, but I want to travel. I want to, you know, I want to go see the world. You know, I've worked so hard. Okay, great. Well, let's add a travel budget plus that, and we do the math. We say, Well, based on the lifestyle that you think you want to live, plus the additional things you want to do like travel, and then we have healthcare and those kind of things, 60 you at 65 with a pot of money you have just counting on Social Security, you're not going to be able to do that. And like we've had to have this conversation with folks before where we

say hey to do what you want to do. You have to work at least till 67, probably 68. We're going to have to. You if you don't know that. You don't want to go into retirement blind on a hope and a prayer because that's not going to just put food on the table. You have to make sure that you're planning for it and thinking about it accordingly. So I think what I would rather know is hey okay I'm 55. I have 10 years until retirement. I've got this window okay. Where am I okay. I'm a little behind. What choices can I make today to catch up. Is catching up even possible because if you get to 64 and you start your retirement planning for 65. You don't have a lot of time to change a whole lot. But if you're 5 years out 10 years out 15 years out more options. You have so many apps. You have so much time that you can begin to like assess that. So I would encourage

them. I, in this, is a situation, a scenario where I do not think that ignorance is bliss. I think that ignorance is ignorant, and I feel that, and that's like, that's like, that's like a cold hard, but you're right. Like, all your examples are sobering, but they're right on. But there are some, and there somebody say, Oh, I'm never going to retire. I know I can't. Well, that's different. If you just say, Hey, look, I'm not saved. I've squandered it. I'm just going to work, and you know, I'm going to like kill over at the office. And, by the way, there's nothing wrong with that. There's a lot of people that don't want to retire. If you want to work as long as you physically can, there is nothing wrong with that. I just don't want people delusionally chasing Financial Independence but not taking the steps that are required to get there, right? It's like me setting out, say, I'm going to swim a 100 miles.

into the ocean and back if I'm not trained for that at all. Ah, you know what? That might not be the undertaking that I want it to be. So, if you can put a little bit of time, a little bit of thought, a little bit of effort on the front end, I don't think it has to be a burden, a yoke, a nuisance. What was the suffocating chain around their neck? I think what's more suffocating is getting there and recognizing you don't have any options. Getting there and recognizing, Okay, I got to make Social Security work. And a lot of people do that. I think 40% of retired Americans right now say that Social Security is their primary source of income in retirement. And that's fine so long as you understand that going into it. What I don't want to see happen is, Okay, you work, work, work, work, live at this level.

you live a lifestyle where you're not deferring gratification. You're living at the top of your means, and then you leave work, and all that's there is a social safety net. That's just not a massive change. It's gonna be a big change, big, big change. And I will say, like, clearly, there's like some mindset things going on or an experience here that this colleague is... that's affecting this colleague's perception of this, right? But I will say too, um, you have more options than you think when calculating your retirement number. It's not like you have to have some exorbitant amount of money. Like, in that example you gave, like, maybe the cold water is like, Oh, you're not going to be able to travel as much, which might be disappointing, but like, Oh, but you could still retire with this much income per month. Like, you have like different levers you can pull, and the more time you have, the more levers you have to pull. And in fact, if this is a younger colleague, um, it's even a

cooler conversation because like you might be like you might be surprised like not that much money invested a month could get you a lot you know like it's actually a pretty exciting conversation to like just offer another perspective like well I look at it like this and like again if it's a young person go check out the wealth multiplier money guu.vn and say man if I would have only changed this thing if I would have only given up that Country Club member I that's a ridiculous example but if I only if if I would have not bought that luxury car and would have instead paid cash and invested that money if I would have not it's so easy the longer the timeline is the the so the the level of significance required behind the decisions is so small but the impact is so huge so the rer you can figure it out the better I just do not think I would bury my bury my head in the sand on that one.

Is 'Knowing Your Number' a Suffocating Chain Around Your Neck?

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The Money Guy Show

The Importance of Knowing Your Retirement Number

Many people fear knowing their retirement number, seeing it as a suffocating burden.

However, understanding this number can be freeing and help assess one's financial situation.

Ignoring the need to know can lead to bad outcomes, making it crucial to diagnose and plan for retirement early.

Planning for Retirement: Key Considerations

Understanding your burn rate and expenses is crucial for retirement planning.

It's important to factor in your desired lifestyle, travel, and healthcare costs when estimating your retirement needs.

Starting your retirement planning early, ideally 10-15 years in advance, gives you more options to catch up and make necessary changes.

The Importance of Financial Awareness for Retirement

The speaker believes that ignorance is not bliss and emphasizes the importance of being aware of one's financial situation.

They acknowledge that some people may choose to work indefinitely and that there's nothing wrong with that.

The speaker warns against delusionally chasing financial independence without taking the necessary steps and highlights the suffocating feeling of having no options in retirement, with 40% of retired Americans relying on Social Security as their primary source of income.

Navigating Financial Transitions and Retirement Planning

Living beyond your means and relying on a social safety net can lead to a significant life change.

It's important to recognize that you have more options than you think when calculating your retirement number.

The more time you have, the more levers you can pull to achieve your retirement goals, making it easier for younger individuals to plan effectively.

Investing a small amount of money each month can lead to significant financial gains over time.

Making simple changes, like forgoing luxury expenses, can have a huge impact on long-term wealth.

It's important to be proactive and aware of the potential benefits of small financial decisions.