What Do Wealth and Comfort Mean in Retirement?

In a recent blog post, I discussed the limitations of comparing your assets to your peers' when deciding if you're ready for retirement. There's no one-size-fits-all number that's going to provide for your ideal retirement, because everyone has a different vision of what their ideal retirement should be like.

"Wealthy" is another category that's a lot more relative than people may realize. Sure, we talk about "the 1%" a lot in our society. Others might point to the IRS' tax brackets to gauge wealth. But Charles Schwab's Modern Wealth Survey 2022 shows that people want more from their money than just wealth -- they want to be able to live a life that aligns with what's most important to them.

1. "Wealthy" by the numbers.

In 2022, the IRS' highest marginal tax rate of 37% applies to individual filers earning more than $539,900 annually and $647,850 for married couples filing jointly.

Schwab's Modern Wealth Survey uses a different metric. Respondents said that "wealthy" means an average of $2.2 million in net worth (total assets minus total liabilities). A step down from that is the category of "financially comfortable," which is an average of $774,000 in net worth.

So, let's imagine someone sitting right in the middle here, who has about $1.5 million in net worth.

Is this person wealthy?

Maybe?

Some folks reading this can imagine living comfortably within those margins for decades. Others might have larger life and retirement goals that will require more annual income and/or a larger nest egg.

Then there's everything about wealth that falls outside the margins of these general numbers. Has this person paid off their mortgage? Is this person carrying considerable credit card debt? Is he supporting adult children more than he should, or still paying off student loans? Is she preparing to start her own business, which might eat into her available assets?

2. Feeling "wealthy."

I understand why people are interested in these sorts of studies. Seeing how you stack up to peers financially can provide a little context for your financial progress. It can also aid in goal setting, which can benefit your long-term planning and keep your retirement expectations realistic.

But to me, the more interesting part of this year's Modern Wealth Survey are the questions Schwab asked about how respondents want to use their money.

Some highlights:

• 73% of Americans say their personal values guide how they make life decisions more today than they did two years ago.
• 82% agree that their personal values play an important role in how they manage their finances.
• 69% agree it is a key priority to use their money to support causes they care about.
• 70% say they are likely to change their lifestyles in the next 12 months to have a positive impact on the world.

After everything we've been through in the last two years, it's not surprising that more and more people are placing a premium on how they can use their money, rather than just worrying about how much money they have. Feeling confident enough in your finances to write that extra check to a local nonprofit or scale back your office hours so that you can spend more time with your grandkids before they go off to college isn't wealth that shows up on your bank statements or tax returns. But increasingly, having that kind of freedom is what being "wealthy" looks and feels like.

3. Personalize your plan.

Put all these numbers I've thrown at you together, and we get to my favorite figure in the Modern Wealth Survey: 84% of Americans are interested in having a more personalized investment portfolio. People want to keep their planning, their values, and their long-term personal and professional goals in sync.

Of course, an investment portfolio that's tailored to your specific goals and needs is just one part of the comprehensive plans we design for folks at Keen Wealth. We’d love the opportunity to discuss how we work through the underlying question of what ‘feeling wealthy’ means to you on your journey to achieving confidence and freedom in your financial future.

About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities. 

The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.

All information was obtained from sources believed to be reliable, but we did not audit the information so we cannot verify the accuracy and do not guarantee reliability. The modern wealth survey was an online survey was conducted by Logica Research from February 8, 2022, to February 27, 2022, among a national sample of 1,000 Americans aged 21 to 75. Quotas were set to balance the national sample on key demographic variables. Schwab’s Retail Client Sentiment survey was collected quarterly via an online survey of clients with retail assets of at least $2,000. There is oversampling to achieve adequate sample sizes for sub-group analysis, and then application of a weighting scheme to create a total respondent population that is representative of Schwab’s client base. Q1 study was fielded at the beginning of the quarter: January 5-16, 2022.  

For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.

20220601-2224839-6979998