Why “Am I on Track to Retire?” Is the Wrong Question

For most people who earn well and pay attention to their money, whether you're on track to retire is the wrong thing to organize your finances around. The better question is what financial dream you can fund in the next year, because money and experiences are worth more to you now than they'll be decades from now.

If you're reading this, you're probably in the top slice of financially interested people, which means you likely have more room to act than you feel you do. Let me explain why the retirement question keeps you from seeing that.

Should you wait until retirement to fund big goals?

Usually not. Here’s why: your money is worth more to you today than it will be in 20 or 30 years, and most people never account for that because it requires factoring in a few things nobody likes to think about:

• You might not be alive in 30 years.
• You might not be as healthy, and a lot of your favorite activities might be off the table.
• Your kids might not be around the way they are now.

Think about the big dreams people actually have: buy the house, take the trip, make memories on an unforgettable vacation to a national park or a cruise in Europe. At 40, your kids think that trip is the highlight of their year. At 65, you're begging them to leave the summer internship to come along. 

Same trip, but you get to enjoy it with your kids at 40 in a way you just don't at 65. And a lot of these folks have never actually looked at where they're on track to retire, so they never find out they could've done it.

Why do frugal, high-earning people hold themselves back?

Because they feel behind even when they aren't. The people who care enough to read this and hire a planner tend to be more frugal and higher-earning than average, which is exactly why they've got firepower they're not using.

Here's what I see all the time. Someone's got six figures of cash sitting in the bank, a maxed-out 401(k), and they still feel like they can't afford to do anything big. But dig a little deeper and their finances are just super underoptimized.

• They're not investing in a brokerage account.
• They're not doing their Roth IRA.
• They're not tax-loss harvesting.
• They're giving cash to charity instead of donating appreciated stock.

Clean up a few of those things and you often uncover enough room to do the financial goal that's been sitting there for years, whether that's renovating the kitchen or something else you keep pushing off. So the real question becomes: why haven't you done it already? Because you can.

What should you ask instead?

Ask what dream you could accomplish in the next year if you looked at your finances intentionally instead of just haphazardly. That question does more for most people in their 30s and 40s than any retirement projection.

I learned this one the hard way. I wanted to retire in my 20s because I hated corporate America, so I saved 75% of my income, lived in rough conditions and set off to travel the world. It was exciting for a while. Then it became museum, church, lunch, museum, dinner with people you met at the hostel, and do it all again tomorrow. It got lonely, and I wasn't accomplishing anything. Turns out the goal was never retirement. It was control over my own time. 

Because if that's your goal, you get there and then you're like, what now? What do I do with my life now? You look around and realize maybe that wasn't the goal after all.

Do you want to go cold turkey and quit working? Most of the time the answer is no, I like my job, I'll keep working. But when you actually run the numbers, a lot of people find they can afford to work less than they thought. So what if we stretch the projection to 20 years but add a yearly trip to cruise somewhere new and a beach house in your favorite spot?

A lot of times, the first reaction is that it feels impossible, and then you look at the projections, and it isn't. And you want to be asking this question jointly with your spouse, not just on your own. Get on the same page about what you both want, because accomplishing things together beats chasing separate goals, and it makes you stronger as a couple.

How do student loans affect your other financial goals?

Student loans do take away money you could put toward other goals. That part is unavoidable. What you can control is how big that bite is.

If you've got six figures of student loans and a professional degree, the amount you send to your loans every month comes down to decisions you make: 

• Filing the right way on your taxes
• Picking the right repayment plan
• Getting on the right forgiveness strategy
• Structuring a refinance with the right term so you keep flexibility and aren't overpaying

Minimize the amount you have to send to your loans wherever you can, and that's money you get back for the goals you actually care about. Your degree helps you here too. Higher income and more job security mean things like taking on debt for a real estate project should feel less scary to you than they would to somebody else. That's one of the blessings of the education you have.

Ask what you can do in the next year

Don't fall into the comparison trap that steals your happiness. There's always someone who had school paid for and a practice handed to them. Sure, that's easier. But you've also got it way easier than the person out framing houses in the hot sun all day for hourly wages, so keep it in perspective and be grateful for what you have.

You don't want to be the richest person in the cemetery. Ask what you can do today, or in the next year, to dramatically improve your life, then go do it, then ask it again next year. If you want to see where you actually stand, you can run your own financial independence number before you decide anything.

If student loans are the thing in the way, a one-time consult can take them off your plate at studentloanplanner.com/book. And if you want someone to help you build the whole plan (investments, taxes, goals and the loans together), that's what financial planning at SLP Wealth is for.