Evaluating Retirement Savings and Financial Independence Goals

Kelly must evaluate her financial goals before reducing retirement savings to ensure long-term stability.

### Assessing Financial Independence Milestones: 401(k) Contributions and 529 Savings
* 💰  Kelly and her spouse are on track to be **liquid millionaires** by ages 38 and 37, with a net worth exceeding **$1 million in liquid investments and cash reserves**.
* 🎯  The decision to **reduce retirement savings to 20%** and allocate **2% to a 529 plan** depends on knowing their **financial independence number** and **current trajectory**.
* 📊 " For some folks being at millionaire status puts them **well on the path to financial independence** and almost there, and for some folks, it may just be the beginning based on the **goals that they have**.
* 📈  The Know Your Number course helps individuals determine their **financial independence target** and assess **progress towards it**.
* 👨‍👩‍👧‍👦 " Your financial future is more important than the kids' financial future, so we got to make sure that's **shorted up first**.
* 📅 " If you start saving **20% between now and your financial independence date**, will you still be on track to be able to hit your number, or is that going to put you **behind**?
* 🤝 " The gravity of your financial decisions becomes so great you don't want to do it alone. So making the decision to **back down savings for retirement, back down savings for financial independence**, that's a pretty **gravitas decision** that you're making.
* 🔍 " You may find that **backing to 20%** does allow you to do that, but if not, then it might not be time to **take your foot off the gas pedal yet**.

[Music] We do have a question coming out from Kelly next. Got it. It says, We are on track to be liquid millionaires in one year at ages 38 and 37, which is super exciting. Congrats! Can we reduce our retirement savings down to 20%, so not maxing out our 401(k)s, and save 2% into 529, so reduce to 20% in order to save to 529? Yes, and that would be not maxing out the 401(k)s. Well, so here's the answer, Kelly. It depends. I don't know. Here's the thing they have to do. First of all, when she says liquid millionaire, that's super exciting. That means that not only just on when you do your net worth statement at the end of the year, you have a million bucks, but inside of the liquid investments that you have, all the investment accounts and your cash accounts, emergency reserves, when you add all that up, it's over a million dollars. It's in seven-figure land. That is awesome. Now, your question is now

that I've hit that milestone. Can I back down my savings? Well, it depends. You don't know where you are unless you have a clear view of what the finish line is. So, the question that I would turn back to you is, have you and your spouse done the Know Your Number course? Do you know what it is you're working towards? Because if you know that your goal is $3 million for financial independence, and here at 38 and 37, you are at $1 million, if you start saving 20% between now and your financial independence date, will you still be on track to be able to hit your number, or is that going to put you behind? You may determine that your financial independence number is a million and a half dollars, and you're really, really close. You cannot know that, and it's not just I think we get so, so much stress and importance gets put on hitting that millionaire status, and it's awesome, and it is so worth celebrating, but it does not mean the same thing for different people. For some

folks being at millionaire status puts them well on the path to financial independence and almost there, and for some folks, it may just be the beginning based on the goals that they have. And so for you guys, you have to define where are we today, where are we going, and what steps are going to be necessary to close that gap. You may find that backing to 20% does allow you to do that, but if not, then it might not be time to take your foot off the gas pedal yet. Any time you're making big life decisions, you have to measure twice, cut once, and that's why I love and I'm hopeful, I'm an optimist, so I'm hopeful that you're going to do the exercise, Kelly, and find out that you're way ahead of the curve. But if you haven't actually done the exercise, and that's why we actually created the Know Your Number courses, 'cause we're like, this is for people who are probably on their path to building good wealth for themselves, but they don't quite need a financial advisor yet.

So how are we going to give them a tool so they can know, are they ahead of the curve, behind the curve, or right where they need to be? Because that's an important metric you need to understand so that you don't prematurely celebrate when you're... 'cause you know, if you watch like a sporting event, and one of the worst things you see is like when somebody gets the ball knocked out at the one-yard line because they were already slowing down to start strutting and talking trash, that's the worst thing. I don't want to happen to your financial life too is because there is a relationship between your expenses and then the income you make. Because what I don't want you to have is this false sense of comfort because maybe you make a huge income. So just because of the income, you were actually able to build up the seven-figure assets that are investing. But if you compare what you actually spend to the income you make, you're like, Whoa, I'm not going to need just a million dollars. My family might...

need this many millions of dollars because that's why you've got to go through the exercise of knowing what your expenses in relationship to where your assets are so you can figure out how comfortable you are for the long term. And I'm hopeful you do the exercise, measure twice, cut once, and then you find out, Yeah, we're way ahead of the curve, especially for something so noble as saving for the kids. Then, yeah, I hope that this has a happy ending. We start saving for them, paying it forward so they can invest in their education. And, you know, I can tell you as a father who's got a now junior in college that was 529s. I've involved her when I take those distributions out of the 529 to kind of have that money discussion about how this all plays out. I want you to be able to have those same conversations for your family, but just make sure that it's at the right time, right place, so you're not. Because your financial future is more important than the kids' financial future, so we got to

make sure that's shorted up first 37 and 38. If I had to guess, they're going to be ahead of the curve, but I just want, it's such a big decision. I just want to make sure, double-check that you truly are ahead of the curve before we give you that permission. And that's part of what my life was too. I told my wife, if we'll go on this journey in my 20s and 30s, and we'll save at these accelerated levels, we will be able to pull back at some point in the future. And that's, and it's been fulfilled in a lot of ways, um, of checking off life things because you are trying to balance and live your best life through every decade, but you got to make sure you do the homework first. Now, the only thing I'll throw out there is if you're uncomfortable because obviously it's a big decision to back down saving versus State the savings, right? And you're nervous about, hey, can we really do this?

Is this appropriate for us? Is this where we want to be? This might be a great time for you to consider taking the relationship to the next level. One of the things we say is that the gravity of your financial decisions becomes so great you don't want to do it alone. So making the decision to back down savings for retirement, back down savings for financial independence, that's a pretty gravitas decision that you're making. So if you'd like a second set of eyes, if you'd like someone to help you navigate that, we'd love to do that. Bound.com, work with us.

We Are Liquid Millionaires (Can We Adjust Our Investment Percentages?)

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Evaluating Retirement Savings After Reaching Millionaire Status

Kelly and her spouse are on track to be liquid millionaires by ages 38 and 37.

They are considering reducing their retirement savings to 20% and allocating 2% to a 529 plan.

The decision to back down savings depends on their financial goals and whether they have a clear plan for achieving financial independence.

Reaching millionaire status is a significant step towards financial independence, but it's essential to define current goals and necessary steps to close the gap.

The "Know Your Number" course was created to help individuals assess their financial progress and determine if they are ahead, behind, or on track.

It's crucial to understand the relationship between expenses and income to avoid a false sense of comfort and premature celebration in one's financial journey.

The Importance of Financial Planning for Family Education

Understanding your expenses in relation to your assets is crucial for long-term financial comfort.

Saving for children's education should be a priority, but ensuring your own financial stability first is essential.

Involving children in the money discussion and making informed decisions can lead to a successful financial future for the whole family.

Considering the Next Step in Your Relationship

Evaluating the appropriateness of your current situation is important.

This may be a good time to take the relationship to the next level, especially when it comes to financial decisions.

If you need guidance in navigating these choices, seeking help from a professional can be beneficial.