{"id":28,"date":"2011-11-21T13:43:25","date_gmt":"2011-11-21T18:43:25","guid":{"rendered":"http:\/\/www.cashflownavigator.com\/blog\/?p=28"},"modified":"2012-01-18T01:22:36","modified_gmt":"2012-01-18T06:22:36","slug":"should-your-retirement-goal-be-measured-only-by-net-worth","status":"publish","type":"post","link":"https:\/\/www.cashflownavigator.com\/blog\/2011\/11\/should-your-retirement-goal-be-measured-only-by-net-worth\/","title":{"rendered":"Should Your Retirement Goal be Measured Only by Net Worth?"},"content":{"rendered":"
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Recently our family went out to eat, and while waiting for our entr\u00e9es one of our sons asked us what we\u2019d like to do when we retire. A good question\u2026one that was fun to answer. My wife said travel and dine out. I agreed, but added that since I am a boy and boys like their toys I absolutely need to a retirement house (not retirement home \u2013 not yet anyway) with a play room. Of course any respectable play room requires a pool table, audio-visual gadgets, the obligatory big screen TV, and so on.<\/div>\n<\/div>\n

Ah, but the fun must eventually end. In this case the end came with a follow-up question, \u201cHow are you going to pay for these things?\u201d That\u2019s a more serious question, and it requires more serious thought.<\/p>\n

When you think of what you\u2019ll need to pay for during retirement, every expense can be grouped into one of two general categories: lump sum purchases or ongoing expenses. Purchasing a retirement house with play room requires a lump sum payment. So does a special trip or vacation.<\/p>\n

Dining, on the other hand \u2013 whether it\u2019s done at home or at a restaurant \u2013 is more of an ongoing, recurring expenditure. So are transportation costs, clothing, medical costs and insurance, utility expenses, etc.<\/p>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 When you think of what you\u2019ll need to pay for during<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 retirement, every expense can be grouped into one of two<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 general categories: lump sum purchases or ongoing expenses.<\/strong><\/p>\n

 <\/p>\n

So, back to the question \u201cHow are you going to pay for these things?\u201d With your retirement fund, of course. But how does your retirement fund allow you to make lump sum purchases without seriously depleting itself? And how does it also<\/em> fund ongoing, recurring expenditures? The answer is, it depends on what your retirement fund is comprised of.<\/p>\n

Net worth might not be enough<\/strong><\/p>\n

As discussed in our preceding article, net worth is the sum total of all your household assets minus the total amount of your liabilities, or debts. Net worth is a measure of your wealth, and it is often used as a measure of the value of one\u2019s retirement fund.<\/p>\n

Let\u2019s say you have a net worth at retirement of $1.2 million. Is that enough? Well, there are many different ways to achieve a net worth of $1.2 million. You might have $1.2 million in assets and $0 in liabilities, or you could have $2.2 million in assets and $1 million in liabilities. In the latter case, you would probably have fairly high monthly payments on your debts, and that could seriously cut into your ability to pay your recurring retirement expenses.<\/p>\n

What if we just focus on your assets. Are all assets the same? If you have $1.2 million in assets and $0 in liabilities but $1.1 million of your asset total is from your primary residence, how will your assets help you pay those nasty recurring retirement expenses?<\/p>\n

As you can see, net worth might not be sufficient, by itself, as a retirement measure. At the very least, the composition<\/em> of your net worth is an important consideration. In our next article we will suggest another measure that, together with net worth, could complete the picture.<\/p>\n

In the meantime we welcome your thoughts on this and other financial planning topics.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Recently our family went out to eat, and while waiting for our entr\u00e9es one of our sons asked us what we\u2019d like to do when we retire. A good question\u2026one that was fun to answer. My wife said travel and dine out. I agreed, but added that since I am a boy and boys like […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[6],"class_list":["post-28","post","type-post","status-publish","format-standard","hentry","category-financial-planning","tag-retirement-goal"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/28","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/comments?post=28"}],"version-history":[{"count":12,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/28\/revisions"}],"predecessor-version":[{"id":42,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/28\/revisions\/42"}],"wp:attachment":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/media?parent=28"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/categories?post=28"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/tags?post=28"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}