Is Your 401(k) Balance Lying to You?
Your 401(k) balance may not tell the whole story. Learn how taxes, account types and withdrawal strategies can affect your real retirement income.
Author: Brandon Jordan, CFP®, CHFC®, CEPA®, CVGA®, CLU®, MSA | CEO of Impact Advisors Group
September has always felt a little different to me. Summer winds down, kids go back to school, vacations end, calendars fill back up, and for many of us, there is an almost automatic shift back into another gear.
For business owners and successful professionals, that rhythm can become so normal that we rarely stop to ask a fairly important question:
What are we still working for?
I don’t mean, “Why do we work?” Work is good. Building something is rewarding. Creating jobs, serving clients, solving problems, and growing a successful business can be incredibly fulfilling. I’m asking a slightly different question.
What are we hoping the NEXT level of success will actually make possible?
For much of our lives, the answer is relatively easy. We work to establish a career, build a business, buy a home, raise a family, pay for college, save for retirement, and become financially independent. But something interesting happens when successful people begin accomplishing their own goals: We move the goalposts.
There is nothing inherently wrong with ANY of that.
However at some point, we should probably know WHY we’re still moving the goalposts.
One of the ideas I’ve continued thinking about from Morgan Housel’s The Psychology of Money is the concept of “enough.” Successful people tend to be VERY good at pursuing the next goal. We’re usually not nearly as good at recognizing when we’ve already won.
Imagine two 55-year-old business owners.
Both have successful companies. Both have accumulated enough outside of their businesses to be financially independent. Neither needs to work another day to maintain his family’s lifestyle.
The first owner keeps doing exactly what made him successful. He reinvests nearly everything, works 60 hours a week, continues growing the company, and delays taking the big family trips. He tells himself he’ll slow down after the next milestone.
Five years later, his business is worth significantly more.
The second owner keeps building too. He enjoys it. BUT he begins asking different questions.
He takes more money off the table and builds liquidity outside the business. He develops his management team so the company isn’t as dependent on him. He takes Fridays off during the summer. He travels with his wife. He spends more time with his children. He gives more generously. He even says NO to an opportunity that would make him more money but cost him something he values more.
Five years later, the first owner may very well have the higher net worth.
But which one is wealthier?
That’s a question no financial statement can answer.
As financial advisors, we spend a tremendous amount of time helping people accumulate. And we should. Saving, investing, growing businesses, minimizing unnecessary taxes, and making prudent financial decisions matter. Eventually good financial planning needs to help answer another IMPACTful question:
How much is enough… and what do we want “enough” to make possible?
That’s where the conversation gets interesting.
Or maybe it simply means having the ability to say NO more often.
Defining “enough” isn’t about losing ambition. It’s about giving our ambition a purpose—or perhaps reminding our ambition of its purpose. I hope I’m never finished building, learning, working, giving, or pursuing meaningful goals; but I also don’t want to spend my entire life moving a finish line that I never intended to cross because eventually the question shouldn’t simply be:
“How much more can we accumulate?”
It should become:
“What do we want what we’ve already accumulated to make possible?”
If you’ve never defined what “enough” looks like for you and your family, it’s a conversation worth having. If you’d like someone to help you think through it, we’re always happy to have that conversation.
The purpose of wealth isn’t simply to increase our standard of living. It’s to increase our capacity to live an IMPACTful life.
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