Ready For Retirement
Ready For Retirement
When Money Isn’t Enough: The 5 Types of Wealth You Need Before Retiring
When the numbers say you can retire, but you can’t step away.
Many people with the financial means to retire keep working, telling themselves one more year will make the plan even stronger. But at what cost to your time, health, and relationships?
This episode explores “the good pickle,” where chasing more financial security comes at the expense of other forms of wealth like time freedom, social connection, and well-being. You will learn why money gets prioritized, how to rebalance, and simple ways to protect all areas of life so your plan supports more than just the numbers.
Because the true measure of success is not just a perfect projection, it is a life well lived.
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The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.
Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements
Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.
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Every retirement projection you run shows that one more year on the job is going to pad your nest egg, but at what cost? To your time, to your health, to your relationships? In this episode we're going to unpack the different kinds of wealth that are crucial not just to a financially secure retirement, but to an overall, purposeful and enjoyable retirement. So stay tuned to see how you can maximize life, not just maximize your numbers. Aaron, in our last couple recordings we talked a lot about the financial things people need to do to retire whether you need a million dollars to make it happen, whether it's more, whether it's less, the three steps to get to that point of how do you actually understand the specific amount that you need. And today we're going to do a continuation of that, and a story that I think will serve as a nice foundation for some of this is a client conversation I was having. This was a couple of years back now and this client was in a great position to retire. They wanted to retire, we ran the numbers, they had enough, but they were caught in a little bit of what you might call a good pickle. Every year they waited, they were in their peak earning years, they were making really good money and that felt really good because they had worked really hard to get to where they were. They couldn't walk away. Or they felt like they couldn't walk away because there was some six-figure bonuses coming in each year. They kept working. Every year they kept working. More of their stock, more of their equity compensation would vest Every year they kept working. They were putting more into their 401k, they were putting more into their deferred comp plan, and every time we met they would want to update their financial model, their financial plan. And every time we met, they would want to update their financial model, their financial plan. And for people who are listening, you might be doing this on your own, whether it's Excel, whether it's just basic calculators, whether you have a program that you run your financial plan through. But I think this is probably a common thing people feel is, every time we ran their numbers, it made sense for them to continue working.
Speaker 1:Every time we ran their numbers. The more you work, the higher your probability of success. The more you work, the more money you'll have at the end of the day. And they couldn't break out of this. Well, why wouldn't I keep working? And what we had?
Speaker 1:To take a big step back and remind them or talk through is when you are making the decision to retire. There's different scorecards that you should be paying attention to and this particular client they were purely paying attention to, and I think a lot of us fall prey to this or guilty of this. Just looking at the financial scorecard, just looking at well, how is this going to optimize the financial wealth I have, my portfolio balance, my net worth, the amount of assets that I have, and that was the lens that they were really focused on. And so today, what I would like to do with you is talk through. Is that the right way to approach it? I think it's certainly, at least partially, the right way to approach it, but I also think there's some other considerations that we should be thinking about when it comes to that decision.
Speaker 2:I think I agree with you. It's one scorecard that we can use and I think we also live in this society like in America we tend to think of that as the most important scorecard At least our society kind of tells us that because that scorecard you can put a number to. But if we look at the other sides of wealth whether that is, how much control do I have over my time or what do my relationships look like, how healthy am I feeling? Am I finding a way to balance my mental well-being as well as my physical well-being, as well as bringing in a paycheck, I think that picture gets a lot more nuanced.
Speaker 2:But you can't put a score to your relationships, not in a literal sense. You can maybe objectively and say, hey, maybe I'm not investing as much into my relationships as I should because maybe I'm working too much. But that financial scorecard we can see our net worth go up over time. We can see that if I hang around to capture this bonus for $5,000, I can get that invested and I can bump up that scorecard. And because it's so easy to measure, I think it's so easy to focus on. But I think let finances be a tool to set you up to use those other ones. So I would argue that finances are pinnacle, but they're certainly not the most important scorecard. I think all of them are equally important in order to have a balanced life.
Speaker 1:Yeah, I think that what you said is exactly right. There's this, it's so tangible I save one more dollar. I see my portfolio balance go up by one more dollar. I work one extra year and run the projection. I see there's this very tight feedback loop of I'm very quickly rewarded for making a decision or at least committing to a decision, and there's that feedback, there's that positive reinforcement of why wouldn't I keep doing this? And I think that what we get so caught up in is thinking that financial planning in a successful retirement or successful life even, is like a math equation. It's a math problem. Just get the numbers right and the bigger the numbers are, the better your life is going to be. There's a book that puts this really well that I recently read. It's called the Five Types of Wealth. It's by Sahil Bloom and what it talks about is that word wealth. Even when we first think about it, what do we think of?
Speaker 2:We think of portfolio balances. What do we think of we?
Speaker 1:think of portfolio balances, we think of income, we think of how much do we have in the bank. Whatever we're thinking of, it all has to do with money, with finances and the way he frames it is. There are five types of wealth, and financial wealth is one of those framings. That is one type of wealth that he writes about in the book, but there's also time wealth, there's social wealth, there's mental wealth. There's social wealth, there's mental wealth, there's physical wealth, and I think that, even though some of those things are maybe more difficult to measure, they're not as objective or not as quantitative as okay, I can save more money in my portfolio. I see the immediate impact. They are no less important and, I would argue, actually increasingly more important the older you get.
Speaker 1:And so I'll go back to the example that I gave this individual making great money, great bonuses, more stock vesting. Well, they were doing that because it's a very high stress job, very demanding job. It was not allowing them to prioritize their health, it was not allowing them to prioritize relationships, it was not allowing them to have any sense of mental well-being, because they were always on 24-7, but they couldn't pull themselves away from it. Because, if we look at those five types of wealth and think of each of those as a scorecard. They're very focused on one. The way I would think about it is let's say this individual working one more year.
Speaker 1:We talk about Monte Carlo, probability of success and how I think it can be very misinterpreted and now it has its use cases, but it's also a distraction, I think, in many ways. Say this individual, their Monte Carlo probability of success went from 95% to 98% because of this work. That feels good when that's all you're looking at. But if I then say well, aaron, what about the other scorecards? What about social wealth? Hard to score that, but does that go from a 70 out of 100 down to 50 because of this decision? What about your mental wealth? It's already pretty low. Does it get even lower? What about your physical wealth, your health, your ability to do the things you want to do?
Speaker 2:I feel like so often we justify the financial scorecard saying that it enables the other cards. Like if I say I work longer and I earn a bigger paycheck that might allow me to put my son through college or that would allow me to pay for a vacation with my family. So we use that financial scorecard to justify the others. But I think a better framing is to kind of say it's a trade-off. If I work late night this week, I've now lost the dinner opportunity with friends. I've lost the opportunity to build that relationship and have that social impact. I've lost the ability to watch a movie with my child. I've lost the opportunity to go on a walk with my spouse. Like, I think you have to realize it's not just that the finances enable you to do the other ones, but they also come with that trade-off.
Speaker 1:How do you get through that? How do you break through that? Because I think you're exactly right and I think that, over a lifetime of almost programming ourselves or creating this sense of here I'm so hardwired to not spend, or I'm so hardwired to invest, or I'm so hardwired to fill in the blank how do we start to pull ourselves out of that?
Speaker 2:and prioritize if we need to be prioritized.
Speaker 2:For me. I am very, very type A, I am very hardworking, I'm a hustler. So I actually had to put rules in place. I have a hard stop. At the end of the day, and for me that is five o'clock. My spouse comes home, my son comes home, my phone goes away. So if somebody texts me I don't see it. I used to work late into the evening and say, oh, I can catch up on this and we'll just have fun on the weekends. But I found I was like missing connection time and I really missed my family, even though they were in the house with me. So I've put a hard stop. My employees can't reach me, I can't do social media, my phone is gone and I'm just forced to be present and that to me, has been so rewarding with my family and it pays back in dividends.
Speaker 1:Was it difficult to do that?
Speaker 2:Yeah, I mean, imagine locking your phone up in the other room. We're all so glued to our phones so I mean, I think it's hard to instate new practices, to have new habits, but if you stick with them they become second nature. Now, if I were to have my phone by me and it would go off, I kind of think, whoa, why am I getting a text at night? This is not something I do at this time. I don't want to be distracted from the fun I'm having. I don't want to be pulled away from watching this show together or going on this walk together. And we intentionally schedule family vacations. And it was so easy for years to say, oh, we'll do vacations later, we can take nicer vacations later, but now, whether it's the nicest vacation or not, we schedule it. It could be a weekend getaway, it could be two towns over, but we make sure that we have those reprieves from works because it's so easy to just say I'll work through it and I'll get to it later.
Speaker 1:I think that's the same thing that I see all the time with people who struggle to retire. Yeah, it's difficult. I remember when I first became a financial advisor, I very much viewed my job as being the problem solver and by problem solver I mean the math problem solver. Like I love math, I love the critical thinking, I love the problem solving. I thought, wow, I could come up with a financial strategy. You need to save this amount and invest this way, withdraw this amount and you're good. And it always. I remember being so caught off guard when people would get that financial plan and they would keep working or they get that financial plan.
Speaker 2:Like I solved this problem for you, why are you still going?
Speaker 1:Exactly. Something wasn't clicking until I realized this is so much deeper than just a financial thing. This is really an identity thing. In a lot of ways, this is very much who I am. There's fears to all this. There's fears to who am I going to be when I retire. What's that going to look like?
Speaker 1:But I think that simply an awareness is a great starting point for people. You talked about our last couple episodes. We talked about how much do you actually need to retire, and the reason we're doing this now is sometimes people reach that. But then there's this fear of well, what am I going to do? Or there's this fear of I could work another year and be even better off. There's this fear of why would I not keep optimizing?
Speaker 1:And I think that my encouragement to people is never stop optimizing, but ask yourself what you're optimizing for. Are you, by optimizing for your financial wealth, totally obliviating or just totally ruining your ability to optimize for your relational wealth, your mental wealth, your physical wealth, your time wealth? That time thing is probably the most important of one day. None of it's going to matter One day. None of the long hours, none of the savings on the portfolio is even going to matter and, yes, that gets really deep and philosophical. But I don't think you can actually have a really good financial plan until you also have at least some semblance of a life plan. What do I want to do? What does a successful life look like? What is most important to me, and am I using my financial wealth to enable these other things, or am I sacrificing these other things simply to optimize for my financial?
Speaker 2:wealth? I think, truly, we don't ask that question that often. You know, what do I really want? I think we kind of get caught up in the day to day of like, ok, well, I go to work at nine, I come home at five, like this is just what I do, but how often do you say is there something else I would rather be doing? Is there something else that would make my life more enjoyable? And I think the problem with the other types of wealth the social, the time, all of hours I immediately get a bump in my paycheck, right. But if I skip going to the gym this week, that doesn't show up in my health, it doesn't show up on the scale this week, it doesn't show up in the way my body moves and how I feel in my body. But do that for 10 years or 20 years. It's going to show up, but there's a delay to it. So I don't think we take it as seriously.
Speaker 1:Yeah, and I think that one of the most important things with all of this is all of these are learned behaviors, in some way of going back to like what you said, because I've had that same thing oh, I'll work hard today so we can take even better vacations, do even better things as a family in the future. It's in some ways, like not just a skill like if you neglect your family for the first 15 years of their life and then all of a sudden want to take great vacations, those vacations aren't. They're going to be very lavish, it's going to look cool on Instagram, but it's not going to be any type of fulfillment or joy or or the type of loving experience you want that to be for your family. These are things that you need to invest in the relationships. These are things that you learn how to do.
Speaker 1:There's so many people who I talk to that are retiring. I don't even know what I want to do for travel. I don't even know what I want to do for community, for relationships, and it's because those are things that they have neglected for so long, telling themselves I'm going to work hard today so I can do those in the future, If you never learn how to do some of those things, or if you never invest in some of those things, they don't just automatically become second nature. You don't just automatically have best friends. You don't just automatically have amazing relationship with your spouse, with your kids, with your family.
Speaker 2:There was a quote from a musician that I loved. Like you can't make new old friends. Like you only get a chance for someone to know you when you were 20 or 30 or 40 by showing up every single year in this relationship. You only have a 10 or 20 year marriage by being there. For the 10 or 20 years it doesn't count if you just phone it in and you're 19.
Speaker 1:Yeah, exactly. And so I think that when people are looking at retirement, when people are looking at financial planning, when people are looking at wealth, hopefully, I think our encouragement in this is, yes, the money absolutely matters. Without the money, you can't do any of this stuff. Yeah, finances, but your ability to be physically healthy, your ability to be mentally, spiritually, whatever healthy all across the board, those are the things that you ultimately want your money to be able to support.
Speaker 1:So when you can think of it in a much more holistic is kind of a buzzword, but like a much more big picture way of what do I actually care about? What are my values? Truly, that's a much better way of making decisions. If I go back to the example from the very beginning, yes, that individual, if all they're looking at when it comes to their wealth and wanting to optimize is the financial side, never stop working, Work until you're 90. Your financial wealth will always keep getting better. But what have you missed along the way? And when you take a more, a broader approach to what is true wealth, you're going to make better decisions. When you start to think through what are the trade-offs I'm making along the way.
Speaker 2:What do you think is the number one thing you can do to kind of get to the point where you say, okay, it's enough, because when all of the data says you have enough to step away, what do you think? There is a nudge or some kind of nugget of information that you could be like okay, I feel like I have enough, not just intellectually. What helps you feel that way?
Speaker 1:I don't think you can do this unless you know thyself, and this comes from journaling, meditating, being quiet. We live in such a culture where the from the time that you wake up until the time that you go to bed emails, instagram ads, things, deadline, like we don't actually know what we want to know. We don't actually know what we want. In many cases I would argue most people don't, because from the time they wake up to the time they go to bed, their attention is being pulled at or controlled in many different directions and you never actually get to the sense of what do I actually want to do. I know one of the things that's most helpful for me is just being up early before the family and spending time, journaling, spending time asking myself this question what do I actually want? Why am I waiting for some of these things? Why don't I start doing some of these things now? Why don't I? And it's not like the answers don't just magically come to you, but when you actually start seeking, you will find that, and you you have to start by. I think this is journal, read, write, meditate. Just have some silence to say who is Aaron and what's important to Aaron. Who is James and what's important to James If I think to the end of my life. One thing I like to think about is what are the things my future self is going to be grateful that the current version of me did? If I think to the end of my life, what's actually going to be most important when I'm talking to my spouse, my kids, my friends, coworkers, et cetera. What do I want those relationships to look like? What do I want those outcomes to look like, et cetera. What do I want those relationships to look like? What do I want those outcomes to look like? Great, what were the things I need to do today be to get there?
Speaker 1:And it could be very simple things. It could be exactly what you said. I want to have a great relationship with my children. How do I do that Presence For the age they are? Today? I'm not going to touch my phone from the time they wake up at seven until I go to work at 8.30. The time I come home at 5.30 until they go to bed at 7.30, my phone's. I think that's a very simple action, but what it's doing is it's a reflection of this is what's most important to me. I could be answering more emails. I could be growing the business more by being on my phone more, but that's not the wealth and that sends a strong message to your kid when you're like it.
Speaker 2:Like my son is just under two, he can't be like oh okay, put your phone down. But if I'm on my phone, like he knows, my eyes are not on him and there are times like I'll put my phone down and I just walk away. He'll pick my phone up and he'll bring it back to me and honestly, that's a sweet moment but it kind of breaks my heart because he thinks like oh, you need this.
Speaker 2:Here you go, so I need to get better at the phone thing. Yeah, and do you have any other thoughts on that? Erin, I think what you said is very powerful. You just make sure that you have time for you, because it's so easy to just have your attention going in a million different directions and forget to even consider what's important to me. You spend your whole day reacting to someone else that it's easy to lose focus of what really matters For me. I go on long runs and I run for like an hour and during that time I might listen to a podcast, I might listen to music or I might just kind of like take in the world around me and it gives me an opportunity to say, okay, like how is my day going, how are things going with my family, what are the things I want to accomplish this week? But it just gives me a mental break from work, from people, and allows me to spend time with myself, and I feel like I better nail down what I want to go after in life in those moments.
Speaker 1:Yeah, awesome. So that's our encouragement. Take the time, set time aside, think who are you, what do you want to do? What does true wealth look like for you? Not just the financial side, but think of the financial side as enabling the other aspects, enabling the relationships, the purpose, the health, other things. When you can just think through things in that lens, you don't need like a perfect metric of how do I measure social well-being, how do I measure, but that framework and that lens can help you make the right types of decisions. But that framework and that lens can help you make the right types of decisions.
Speaker 2:I will give the two cents of like. Maybe it is worth writing out these different categories time, social, mental, physical, financial and giving yourself some kind of score, because at least if you say, oh, I'm really dragging in social, maybe you spend some more time there. So if you can put some kind of measurement to it, maybe you score yourself one out of 10, you can say where you need to kind of focus a little bit more.
Speaker 1:Yeah, exactly. And then again, the book that I'm basing some of this on is called Five Types of Wealth. Go read it. This isn't an endorsement, we're not going to pay for this. I just thought it was a very good book that helps to reframe how you should think about about wealth to have. I'll always say with clients, with the team, the sign of a good financial plan is a life well lived.
Speaker 2:Yeah.
Speaker 1:It's not a 99% success score on your Monte Carlo, it's not a certain net worth, it's a life well lived, and that covers all these things broadly, with the financial wealth being the bedrock that supports it all. So anything else, erin, to add onto this before we wrap up for today?
Speaker 2:I think that kind of covers it. I would just say, you know, focus on the other areas, not just money.
Speaker 1:See you all next time.
Speaker 2:See ya.
