Should Your Reti rement Goal be Measured Only by Net Worth?
Recently our family went out to eat, and while waiting for our entries one of our sons asked us what we’d like to do when we retire. A good question…one 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 - 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. Ah, but the fun must eventually end. In this case the end came with a follow-up question, "How are you going to pay for these things?" That’s a more serious question, and it requires more serious thought. When you think of what you’ll 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. Dining, on the other hand - whether it’s done at home or at a restaurant - is more of an ongoing, recurring expenditure. So are transportation costs, clothing, medical costs and insurance, utility expenses, etc. When you think of what you’ll need to pay for during retirement, every expense can be grouped into one of two general categories: lump sum purchases or ongoing expenses. So, back to the question "How are you going to pay for these things?" 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 fund ongoing, recurring expenditures? The answer is, it depends on what your retirement fund is comprised of. Net worth might not be enough