Money Monday Blog

There’s a quote I’ve seen in different variations over the years:

“In peace, men become enemies of themselves; in war, they unite against a common foe.”

It’s a fascinating concept. While physical war is a tragedy—bringing loss, suffering, and destruction—the analogy behind this idea speaks to something deeper in human nature. Most of us long for an easier life. We want a flexible schedule, fewer responsibilities, less pressure. In short, we crave peace. But when life gets too easy—when we lack a challenge, a mission, or a reason to get up in the morning—that peace can quietly become self-destruction.

I’ve seen it happen to people who retire early without a plan, who suddenly find themselves adrift. At first, it feels like freedom. No alarm clocks. No obligations. No one to answer to. But then, without something meaningful to work toward, bad habits creep in. Happy hour starts earlier. Endless scrolling, online gaming, or just numbing out replaces real engagement with life. People surround themselves with others who are also drifting—without purpose, without direction.

My pastor once described it like this: If a pickup truck doesn’t have enough weight in the bed, it bounces all over the road. It doesn’t drive right. The weight keeps it steady, grounded, moving in the right direction. In the same way, we need a certain amount of weight in our lives—pressure, responsibility, something pulling us forward.

Ironically, the life many of us fantasize about—total freedom, no stress, no obligations—is often the path to feeling lost. As Morgan Housel recently said, "what we actually need is the right balance of freedom and purpose. Too much purpose without freedom feels like a grind. Too much freedom without purpose feels empty."

The best version of ourselves doesn’t come from avoiding responsibility—it comes from choosing the right responsibilities. From stepping into challenges instead of running from them. From understanding that while peace is nice, purpose is necessary.

So be careful what you wish for. You might just get it—and find yourself wishing for something more.

I’ve written about asset allocation before, but when markets turn volatile, it’s always worth revisiting how we set a portfolio’s allocation in the first place. Roughly every four years, U.S. stocks experience an intra-year decline of 20% or more. When that happens, concerns rise, and both advisors and clients are reminded why allocation matters. Interestingly, no one questions risk when the market is soaring.

At our firm, we use three key approaches to determine asset allocation, and in practice, we combine all three. Here’s the framework:

1. Goals-Based Asset Allocation

The best starting point is a client’s goals. Asset allocation should align with when money will be needed. If a retired client requires a 4% withdrawal rate, they should have 5–10 years of spending in bonds, cash, or a bond ladder. If a client is buying a home in two years, that money should be in a money market fund—not stocks. This approach creates a buffer, so clients aren’t forced to sell equities during a downturn.

2. Risk Tolerance

Once goals are accounted for, we consider a client’s comfort with volatility. Risk tolerance tends to be forgotten in bull markets but becomes painfully relevant in bear markets. If a client is likely to panic and sell during a downturn, we need to structure their portfolio accordingly. Wealth without peace of mind isn’t really wealth. Finding the right allocation helps clients stay invested, which is often the most important factor in long-term success.

3. Market Valuations & Tactical Tilts

While we never advocate market timing, valuation-aware investing can play a role. If U.S. equities become expensive relative to history, we may tilt 3–5% of a portfolio toward international stocks or other asset classes that offer better risk-adjusted return potential. Conversely, when valuations shift, we adjust accordingly. These tilts are incremental—not wholesale shifts—but they help improve long-term outcomes.

The Right Mix

A strong asset allocation strategy starts with goals, adjusts for risk tolerance, and fine-tunes based on market conditions. This framework helps clients balance short-term security with long-term growth. Market volatility will always test investor confidence, but having a thoughtful and disciplined approach ensures that clients stay on track—no matter what the headlines say.

The Tension Between Serving Present Jim and Future Jim

Behavioral coaching is one of the most complex and valuable things we do as advisors. Markets move, emotions rise, and life circumstances shift—but through it all, we must be the steady voice of reason, helping clients make decisions that serve not just who they are today, but who they will be decades from now.

As General John M. Schofield once said, “The most important thing to do is to be able to do the ordinary thing when things are extraordinary.” That’s easier said than done, especially when markets feel anything but ordinary.

I was reminded of this recently in a conversation with a longtime client—we’ll call him Jim.

Jim is financially secure. His portfolio is well-structured, his income needs are covered, and the money he has in equities is unlikely to ever be spent. And yet, when volatility hits, Present Jim feels the pull toward safety. He considers shifting a portion of his investments into bonds and cash—just to take some risk off the table.

But what about Future Jim?

Future Jim has big goals. He wants to grow his wealth over the next several decades, create a lasting impact for his family, and make the most of his financial resources. He has generational wealth goals for his family and charity. The dilemma is clear: The steps that feel “safe” to Present Jim today may quietly sabotage the outcomes that matter most to Future Jim down the road.

The Cost of Playing It Safe

I walked Jim through some simple math.

Historically, stocks have returned around 10% per year, while bonds have returned just under 5%. Over 40 years, $1 million at 5% grows to $7 million. At 10%, it grows to $45 million.

Jim has several million dollars in equities. Each million he shifts to bonds and cash isn’t just $1 million moved to safety—it’s a (potential) long-term tradeoff of $45 million versus $7 million.

That number obviously surprised him. Even smart people underestimate compound interest over time. Most resort to the simplistic thinking that 10% would yield twice the result that 5% yields. This causes them to underestimate the opportunity cost of fear.

A brief detour and disclosure (for our friends in compliance that may be reading😀)… There is no guarantee that past stock to bond performance relationships will continue exactly as they have in the past. Will stocks return twice as much as bonds in the future? Maybe they will and maybe they won’t, but it is incredibly likely there will always be some risk premium that leads to superior returns for stocks over the long term. It can also be said that these calculations don’t include taxes, investment fees, or inflation. When these numbers are included, it actually makes the real impact of owning stocks over time even more pronounced because the bond returns round to zero when including these 3 costs are included.

Ok, back to Jim…

It is our job to serve both present and future Jim… as much as I want to advocate for Future Jim, I also have to acknowledge that investing isn’t just about math—it’s about behavior.

The Real Role of an Advisor

There are times when the right answer is a simple pep talk about thinking long term and turning off the news. There are also times when reallocating to reduce risk is absolutely the right move. If someone truly can’t sleep at night, what’s the point of maximizing returns? Peace of mind is its own kind of wealth. If risk leads to stress that undermines someone’s health, relationships, or ability to enjoy their life, then holding a more conservative portfolio isn’t a failure—it’s wisdom.

This is why I don’t believe AI will replace what we do as advisors anytime soon. The right answer isn’t always clear. Sometimes, our job is to push back—to remind clients of their long-term goals and show them what’s at stake. Other times, it’s to listen deeply, recognize their emotional needs, and adjust accordingly.

The real art of financial advising is knowing which response is right in the moment.

For Jim, the key wasn’t making a drastic shift. It was stepping back and recognizing the real tradeoff—not just moving to safety but potentially sacrificing millions in future wealth. In the end, we didn’t move everything, but we made an intentional decision—balancing both Present Jim’s peace of mind and Future Jim’s long-term goals.

The Question We Must Keep Asking

This tension—between serving the client today and protecting the client decades from now—is at the core of what we do.

Today’s discussion was about market volatility, but this same dilemma shows up in spending habits, tax decisions, and countless other areas. In every case, the question remains:

Are we serving Present Jim at the expense of Future Jim?

There’s no perfect answer. But the more we help clients navigate this tension with clarity, empathy, and wisdom, the more valuable our role becomes.

Making Decisions with Your Heart, Brain, and Gut

In the world of decision-making, there’s a growing body of thought that suggests we don’t just think with our brains—we also “think” with our hearts and our guts. This idea is rooted in the concept of “three brains” popularized by neuroscientist Dr. Paul MacLean and later expanded by Dr. Michael Gershon, who studied the enteric nervous system (the “second brain” in the gut). The notion is that our head, heart, and gut each contribute uniquely to the decision-making process:

• The Brain (Head): Analyzes, calculates, and rationalizes. It’s where logic and reasoning live.

• The Heart: Connects to emotions, values, and relationships. It guides us through compassion, love, and empathy.

• The Gut: Taps into intuition and instinct. It gives us that “feeling” or hunch, often without a clear logical reason.

When All Three Align

The most powerful decisions come when your head, heart, and gut are in harmony. You feel confident, assured, and at peace with the choice. But what happens when they don’t agree?

When the Gut Disagrees

I recently faced a situation where my heart and my brain were fully onboard, but my gut wasn’t. These are the toughest decisions to navigate because, on the surface, everything makes sense. The logic checks out. The emotions align. But something deep inside is uneasy. It’s a whisper that says, “Something’s off.” And I’ve learned that ignoring that whisper can lead to regret.

These gut-feeling dilemmas are often the most critical decisions because they require the courage to pause and dig deeper, even when it’s inconvenient or uncomfortable. It’s about asking hard questions: Is fear influencing my gut? Is my intuition picking up on something my brain hasn’t processed yet?

Balancing All Three: 7 Tips for Decision-Making

1. Start with the Brain: Analyze and Evaluate

Begin with logic. Gather facts, evaluate pros and cons, and consider consequences. Make sure you understand the situation intellectually before moving to the emotional and intuitive realms.

2. Check in with Your Heart: Feel and Reflect

How does this decision make you feel? Does it align with your values and who you are? If your heart isn’t in it, it’s likely that passion and commitment will wane over time.

3. Listen to Your Gut: Trust Your Intuition

What’s your instinctive reaction? If your gut feels unsettled, don’t rush to dismiss it. This is often your subconscious picking up on subtle clues or patterns your conscious mind hasn’t fully recognized.

4. Find the Conflict and Explore It

When one part disagrees, explore the conflict. For example, if your brain and heart are in, but your gut isn’t, dig into the “why.” Is it fear of risk or change? Or is it genuine insight warning you of potential issues?

5. Give It Time

Sometimes clarity comes with time. Sleep on it. Go for a walk. Give your mind space to process and see if alignment naturally emerges.

6. Seek Outside Perspective

Talk to trusted mentors or friends who can offer an objective view. Sometimes an outside perspective can help you see what you’re too close to recognize.

7. Accept Imperfection

Not every decision will be perfect. Sometimes you have to move forward with the best choice possible, knowing that you can adjust and learn along the way.

The Most Important Decisions

The hardest decisions are the ones where two out of three are aligned. These decisions require patience, courage, and a willingness to live in the tension until the right path becomes clear. But they’re also the most important decisions to get right, because they shape the direction of our lives in profound ways.

Conclusion

Making decisions using your heart, brain, and gut isn’t always easy, but it’s worth the effort. It leads to choices that are not only logically sound but also emotionally fulfilling and intuitively right. And when all three align, that’s where the magic happens.

If you’re facing a tough decision, take a moment to check in with all three. It might just be the key to making the best choice possible. I’ve learned taking time to reflect is really hard, but really worth it. Most successful people found success in part because of their ability to act fast and make decisions in real time. For many of us, the mindset that got us to this point, might need to evolve to get to the next mountaintop. In this next season, I’m trying to slow down a little bit… trusting all three brains might allow me and our team to go further even if it isn’t fastest.

Will AI Take Over Financial Advice?

I get asked all the time, “Will AI ever fully take over financial advice?”

It’s ironic, really, because I’m using AI right now to assist me in writing this. AI is woven into so many aspects of our lives, from the way we shop online to the way we navigate our schedules. It’s made tasks faster, more efficient, and, in many cases, better.

In the world of financial advice, AI is already revolutionizing the way we analyze data, construct investment portfolios, and monitor financial plans. Algorithms can sift through mountains of financial information in seconds, helping us make informed decisions quicker than ever before.

But that question lingers: Will AI take over?

I think about a quote often attributed to Miles Kington:

“Knowledge is knowing that a tomato is a fruit. Wisdom is knowing not to put it in a fruit salad.”

It’s a clever line, but it carries a deeper truth about the difference between knowledge and wisdom. AI has the potential to accumulate an almost limitless amount of knowledge. It can analyze markets, predict trends, and calculate probabilities with mind-blowing precision. But will it ever truly have wisdom?

The Limits of Algorithms

A financial plan is more than a collection of numbers. It’s more than tax strategies and investment allocations. It’s about hopes and dreams, fears and uncertainties. It’s about the widow who worries if her husband’s life insurance will be enough, the young couple saving for their first home, or the retiree wondering how to leave a legacy that matters.

Sure, AI can tell you some of the most tax-efficient ways to withdraw from your retirement account, but will it understand the anxiety of running out of money? It can suggest an optimal savings rate, but will it grasp the tension between saving for the future and enjoying life now?

Knowledge vs. Wisdom in Financial Advice

Knowledge is knowing what the data says. Wisdom is understanding what that data means in the context of someone’s life. Ultimately the best financial plan is the one that is implemented. Human advisors often know that the goal isn’t a perfect plan, it’s designing a plan through the lens of human behavior - Deeply knowing someone’s “money story,” their tendencies, their motivations and their fears and building an imperfect plan that actually gets done is the real job of the real advisor. Imperfect plans that are implemented will always beat perfect plans that sit on the shelf. Wisdom is understanding what each client can stick with for the long term and knowing progress trumps perfection when it comes to human behavior.

This is where I believe AI, for all its brilliance, meets its limits. AI can be trained to recognize patterns and make predictions, but can it understand the nuances of a family’s dynamic? Can it empathize with a client’s grief after losing a loved one or join in the joy of welcoming a new grandchild? Even further, can it predict how clients might react to a down market or how a loss might be a trigger for past trauma.

This isn’t just about emotional intelligence—it’s about tailoring financial advice to who a client is as a person, not just who they are on paper. It’s about hearing a client’s story and crafting a plan that resonates with their values, hopes, and dreams.

AI as a Tool, Not a Replacement

I believe AI will continue to assist us in serving clients better. It will make investing more efficient and streamline the strategic parts of financial planning. It will help us cut through complexity and bring clarity to decision-making. In many ways, it will make us better at what we do.

But I don’t believe it will replace the need for human advice.

Because financial advice isn’t just about numbers; it’s about people. And people need more than knowledge—they need wisdom. They need someone who sees them, understands them, and walks alongside them through life’s ups and downs.

The Future of Financial Advice

Will AI take over financial advice? I don’t know for sure. But I do know that as long as clients need someone who can listen, empathize, and help them live a life beyond money, there will be a place for human advisors.

I think the future is human + digital. This means empathy and efficiency will lead to better client outcomes. This pairing will be great for clients and advisors.

We may use AI to enhance our services, but the heart of what we do—the wisdom to know what matters most to each client—will always require a human touch.

Because at the end of the day, knowledge is knowing how to make a financial plan. Wisdom is knowing how to make it truly theirs.

What Mother Teresa Taught Me About Being a Financial Advisor

Mother Teresa was once asked by a reporter, “What’s your biggest problem?”

Without hesitation, she answered with one word: “Professionalism.”

She went on to explain, “Here are these servants of Jesus who care for the poorest of the poor. I have one who just went off and came back with her medical degree. Others have returned with nursing degrees. Another with a master’s in social work… and when they came back with their degrees, their first question always is, ‘Where’s my office?’”

She continued, “But you know what I do? I send them over to the House of the Dying where they simply hold the hands of dying people for six months. After that, they’re ready to be servants again.”

I recently saw this quote and thought about all of the ways it relates to being a financial advisor. It's a common experience across all careers to mistakenly believe that acquiring more knowledge entitles us to the corner office, when in fact the only true utility of knowledge is the ability to serve others.

The Weight of Success

In our industry (and every industry), it’s easy to get caught up in credentials, accolades, and innovative solutions. We pursue advanced designations and craft intricate strategies designed to maximize wealth and minimize risk. And make no mistake—those things matter. They matter a lot.

But sometimes, in an effort to master our craft, we can forget what this work is truly about: Serving the person right in front of us.

It’s easy to walk into a meeting and see a financial portfolio, an estate plan, or a business succession strategy. But behind those documents are people with real lives—people who are excited, scared, hopeful, and vulnerable. People that may have never told anyone the things they tell their advisor… that’s a privilege.

The Power of Presence

Some of my best moments as an advisor weren’t about delivering a great strategy or showcasing a complex solution. They were the moments I cried with clients over the loss of a spouse. The moments I celebrated big wins like the birth of a grandchild or the sale of a family business. The days I spent simply listening, letting them process life’s highs and lows.

I’ve learned that one of the most powerful things we can give our clients isn’t a financial strategy but the confidence that someone truly cares about them.

Knowing we have their back—knowing we see them not just as clients but as people—gives them the courage to live well. And isn’t that the real goal? Not just to have wealth but to live a life full of meaning and purpose.

Balancing Strategy and Empathy

Mother Teresa’s wisdom is a reminder that while our expertise and strategic thinking are vital, they should never overshadow our humanity. We need to be more than just professionals; we need to be servants in the truest sense—willing to sit with people in their pain and celebrate with them in their joy.

It’s about balancing knowledge with empathy, solutions with presence. It’s about remembering that, at its core, this work isn’t just about wealth; it’s about life.

Ready to Serve

Just like Mother Teresa sent her newly credentialed servants to hold the hands of the dying, we, too, must find ways to stay connected to the human side of our work. To remember that no matter how much we achieve, it always comes back to serving the person in front of us.

Because when we do that, we’re not just financial advisors—we’re confidants, loyal advocates and sometimes, just the person who shows up.

Every day, over 11,500 people in the U.S. turn 65 (see chart above to show trends in the US and around the world). It’s a milestone deeply rooted in tradition, yet its relevance in modern retirement planning is increasingly questioned. To understand how we got here and where we’re headed, let’s explore the origin of age 65 as the retirement benchmark and why today’s retirees face a unique dilemma that demands a new approach to financial planning.

The Origin of Age 65: A Historical Perspective

The age of 65 as a retirement milestone dates back to 1889, when German Chancellor Otto von Bismarck introduced the world’s first state pension plan. Bismarck set the retirement age at 70, which was later lowered to 65 in 1916. At the time, life expectancy in Germany was significantly lower than 65, meaning few people lived long enough to collect the benefit. This made the system financially sustainable and politically palatable.

The U.S. adopted age 65 as the standard when Social Security was introduced in 1935. Back then, life expectancy at birth was about 61 years, so only a small portion of the population would benefit. Today, however, average life expectancy in the U.S. has risen dramatically, with a couple reaching age 65 now having a joint life expectancy well into their 90s.

Why 65 May Not Be the Ideal Retirement Age Today

Age 65 was a logical choice in an era of shorter lifespans and physically demanding work. But for today’s retirees—many of whom have spent their careers in white-collar professions—65 may no longer be the ideal age to fully retire. With longer life expectancies, retiring at 65 could mean funding a retirement that spans three decades or more.

Complicating matters further is the decline of pension plans. Previous generations could rely on employer-provided pensions for a steady retirement income. Today, most retirees depend on personal savings, Social Security, and investments. This shift places the burden of retirement funding on individuals, requiring more strategic planning to ensure financial security throughout retirement.

The Unique Dilemma Facing Today’s Retirees

This generation of retirees is the first to face a unique dilemma: balancing a long-life expectancy with the absence of guaranteed income from pensions. They must navigate between two extremes (credit: Matt Heckman)

• Extreme 1: Running Out of Money... Retiring at 65 could mean funding 30+ years of expenses without a pension safety net. This requires careful planning to avoid outliving one’s assets, particularly in the face of rising healthcare costs and inflation.

• Extreme 2: Dying with Regret and Unspent Wealth... On the other end of the spectrum, some retirees spend too conservatively, passing away with substantial unspent wealth—and often, regrets about the experiences they never pursued. The fear of running out of money can lead to an overly frugal lifestyle, preventing people from fully enjoying their retirement years.

Coaching Clients Between These Extremes

Today’s financial advisor must be an expert not just in investment management, but in guiding clients through these emotional and financial challenges. The excellent advisor helps clients navigate the delicate balance between financial security and living fully. This involves:

• Crafting dynamic withdrawal strategies that adjust to market conditions and personal spending needs.

• Encouraging clients to pursue meaningful experiences and dreams while maintaining financial security.

• Evaluating and improving housing and location options is essential. Financial plans should take into account factors such as proximity to family, the feasibility of owning a second home, local climate, social connections, and state tax implications.

• Educating and empowering clients on how to find a “second act,” which could mean fulfilling part time or full-time work and could be paid or unpaid depending on their financial situation (my happiest retired clients work about 20 hours per week doing something they love).

• Preparing clients for the emotional aspects of retirement, including the transition from saving to spending.

Conclusion: Redefining Retirement at 65

Turning 65 is a significant milestone, but it shouldn’t automatically signal full retirement. With longer life expectancies, changing work environments, and the decline of pensions, the traditional concept of retirement needs to evolve. Financial advisors play a crucial role in helping retirees find a balance between financial security and living life fully—between running out of money and leaving behind a legacy of unspent wealth and unfulfilled dreams.

Age 65 is no longer a finish line; it’s a checkpoint in a much longer journey. As the number of people reaching this milestone continues to grow, so too does the need for thoughtful, empathetic financial guidance.

If you’re approaching retirement age or supporting someone who is, consider how your financial plan aligns with your vision for the future. Are you prepared to navigate the journey between these two extremes?

I recently heard Bill Perkins say that one of the biggest problems for business owners is when they tell employees what to do instead of what they want. That really stuck with me.

Too often, as leaders, we default to giving instructions instead of casting a vision. It might be because we don’t want to give our team too much room to fail, or it could mean we have the wrong person in the wrong seat. Either way, when we get too involved in how things get done, we limit both our team’s growth and our own ability to lead at a higher level.

The real goal is to hire smart, capable people and empower them to figure things out. But knowing how much freedom to give isn’t always easy. I’ve made a lot of mistakes in this area, and I continue to learn from them.

(Note: Some of our blog readers are in a leadership position and some are in an employee position… there are key learnings below either way😀)

So how do you know if you have the right people in place? Here are five signs:

1. They Think in Outcomes, Not Just Tasks

The right person doesn’t just wait for instructions—they seek to understand the broader goal and take initiative. If you tell them what you want rather than how to do it, they should be able to chart a path forward. If you find yourself constantly micromanaging or spelling out every step, you may have someone who isn’t wired to think strategically.

2. They Own Problems, Not Just Work

The right person doesn’t just complete tasks; they take ownership. When something goes wrong, they don’t blame others or wait for you to solve it—they bring solutions. If you have someone who always looks to you for the next move, they might not be the right fit for their current role.

3. They Can Handle Ambiguity

Business is messy, and not everything comes with a playbook. The right person can work through uncertainty and figure things out. If someone constantly struggles without step-by-step instructions, they may be better suited for a different role—or a company culture that values compliance over creativity. (Note: There are some roles that a “task mentality” or “compliance mentality” may be incredibly important, it’s critical to know which roles those are and shift expectations)

4. They Make You Better

A great team member doesn’t just execute your vision; they challenge and refine it. The best people push back when needed, offer new ideas, and make you think in ways you wouldn’t have on your own. If you’re the only one driving innovation and problem-solving, you might not have the right team around you.

5. You Trust Them to Deliver

At the end of the day, the right person gives you confidence. You don’t have to check in constantly or worry about things falling through the cracks. If you feel the need to control every detail, it’s worth asking—do I need to loosen my grip, or do I have the wrong person in this role?

The Hardest (and Most Important) Part

As a leader or business owner (or both), it’s a constant balancing act—knowing when to step in and when to let go. But the more we can lead with outcomes instead of instructions, the more we create a culture of ownership, growth, and trust.

If you’re struggling with this, you’re not alone. I still wrestle with it daily. But the more we learn to hire the right people and give them the freedom to thrive, the more we create a business that doesn’t just depend on us—but grows beyond us.

When it comes to building wealth, people love to debate investment strategies, market timing, and tax efficiency. But the single most important factor that determines your financial future isn’t any of those things. It’s simply what percentage of your income you save (or said another way, what percent of your income, you don’t spend😊).

Why? Because your savings rate determines both how much you invest and how much you need to retire. If you save more, you build wealth faster. And if you’re used to living on less, you don’t need as much money to maintain your lifestyle in retirement.

Why Savings Rate Matters More Than Anything Else

Imagine two people with identical incomes and investment returns:

• Person A saves 10% of their income.

• Person B Saves 20% of their income.

• Person C saves 30%.

Even if they invest the same way, Person B and C will reach financial independence much sooner because they’re building wealth faster and reducing the amount they need in retirement.

An Example: The Power of Saving More

Let’s take a 25-year-old earning $75,000 per year. Assume they:

• Get a 5% raise annually.

• Invest their savings at an 8% annual return.

• Work for 40 years until age 65.

How much of their income could they replace in retirement if they follow the 4% rule (which says you can safely withdraw 4% of your portfolio each year)?

Retirement Income Replacement by Savings Rate:

Savings Rate: 10%

Portfolio at Retirement: $4.06M

Annual Retirement Income (4% Rule): $162,400

% of Final Income Replaced: 39%

Savings Rate: 20%

Portfolio at Retirement: $8.12M

Annual Retirement Income (4% Rule): $324,800

% of Final Income Replaced: 78%

Savings Rate: 30%

Portfolio at Retirement: $12.18M

Annual Retirement Income (4% Rule): $487,200

% of Final Income Replaced: 117%

*Numbers reflect an 8% growth rate over 40 years and take into account income tax and FICA in calculating the income replaced percentage.

The above numbers don’t include social security or pensions. In addition, you likely don’t need to replace 100% of your income because you weren’t used to living on 100%. The amount you saved annually also made you accustomed to living on less. Ironically the 30% savers replace more than 100% of their income and they are the ones used to living on 70% of their income.

In practice, most people need to pick a savings rate somewhere between 10 and 30%. A good default is 20%, but if you can’t start there, start somewhere and work towards that number.

Here is The Best Part? You Control Your Savings Rate

Unlike market returns or economic conditions, your savings rate is something you control. You decide:

• How much house you buy

• How expensive your car is

• How much lifestyle inflation you allow

• How much of your raises you save vs. spend

Every dollar you don’t spend is a dollar that can work for you.

The Bottom Line

If you want financial security, start by focusing on your savings rate. Investing matters, but even the best investment strategy can’t compensate for a low savings rate. The more you save, the sooner you gain freedom. And freedom is what wealth is really about.

Warren Buffett is famous for saying, “I want to leave my children enough so that they can do anything, but not so much that they can do nothing.” This quote encapsulates a challenge many clients face: how to provide for their children’s futures without stifling their ambition or work ethic. No one knows exactly where that sweet spot is for every family. That’s where financial advisors come in.

Let’s consider the story of Brian and Juli, a couple in their late-40s with four children. Brian and Juli were both self-made; neither had come from wealth, and they worked hard to build a comfortable life for their family. They believed in the value of hard work and wanted to ensure their children appreciated it as well.

Finding the Balance

Brian and Juli decided to leave a significant inheritance for their children, but they worried about the potential consequences. They sought to provide financial security, but they didn’t want their children to become complacent or lose the drive that comes from overcoming life’s challenges.

Steps to Achieve the Sweet Spot

1. Open Conversations About Money

Brian and Juli started by having open conversations with their children about money. They discussed financial responsibility and the value of hard work. By sharing their experiences, they hoped to instill a respect for money and its role in achieving personal goals.

2. Set Up Trusts with Conditions

Rather than leaving a lump sum inheritance, they decided to set up trusts with specific conditions. These trusts were structured to support their children’s education, entrepreneurial ventures, and meaningful pursuits without providing unlimited access to the funds.

3. Encourage Financial Independence

Brian and Juli also encouraged their children to find their own paths to financial independence. They supported them in seeking internships, jobs, and eventually careers that aligned with their passions.

4. Philanthropy and Giving Back

Another important lesson they imparted was the value of giving back. Brian and Juli involved their children in philanthropic activities and encouraged them to contribute to causes they were passionate about. This helped their children understand that wealth can be a tool for positive change.

5. Create Legacy Experiences

Brian and Juli believed in creating impactful moments while still living. They sponsored monthly date nights for their children and organized family vacations. These moments not only provided financial support but also strengthened family bonds and created lasting memories.

Final Thoughts

There’s no one-size-fits-all answer to finding the balance that Warren Buffett described. It requires thoughtful planning, open communication, and a tailored approach that reflects each family’s values and goals. The goal is to empower the next generation—not just financially, but with the values and skills they need to make their own mark on the world. Here’s to finding that balance!