Transcript
We’re going to start with a question from Templar on high. He has a 401k question. He asks, “What defines 401K critical mass? When can we back off safely? I’m 37 with 2.2 times my household income in the tank. What does the age-to-mass curve look like?”
This is an interesting question, Templar. It’s less about your age, and I’m going to say it’s even less about your savings rate. You’ve probably heard Brian say before how he motivated his wife to save early on by saying, “Hey sweetheart, if we can go pedal to the metal right now in our 20s and 30s, we can back off a little bit when we get to our 40s.” So you’re probably wondering, “How do I know if I’ve done that?” We recognize that many people have that question, and that’s why we came up with the Know Your Number course.
I’m going to argue that it’s not age-based or even based solely on the savings rate. It’s number-based, just like most things in life. We have to begin with the end in mind. If we don’t know the destination, how can we know if we’re on the right path? With our Know Your Number course, we aim to help you define the destination. So, let’s figure out how much you need. If you’re 37 years old with 2.2 times your income saved up, and you want to retire at 59, what’s that number at 59? Once you know your number, you can determine how much you need to save between now and 59 to hit that number. Maybe it’s 18. If you’ve been saving 25, then yes, you can back off and take your foot off the pedal. Or maybe you’ve been saving 18, but you’re not going to reach your goal by 59. In that case, you may need to start saving 20-25.
Knowing your number will be the determining factor in whether you can back off or not. If you want to learn more about the course, visit learn.moneyguy.com. I think it’s a great resource to figure out the answer. I want to echo some of the things you shared, Templar. Let me give you an example. Imagine someone in their mid-40s with a great income. They live a minimalist lifestyle and crave simplicity, with a small house and minimal expenses. Now, compare that to someone who is part of the Fat FIRE movement, seeking to maintain a similar lifestyle to what they have while working, and even beyond, with expensive hobbies and travel. These two individuals, despite having the same age and income, will have completely different numbers based on their spending and financial independence goals.
That’s why it’s crucial to understand your unique variables and goals when finding the solution or answer that fits your situation. I always get nervous when people throw out a generic percentage without truly understanding the why. That’s why I appreciate that you’re watching content like this, as it allows you to explore your desires and uncover the why behind them.
The Know Your Number course serves as an exclamation point that goes beyond daydreaming. It provides you with the actual number you need or the additional monthly savings required. It allows you to consider variables like inflation and different rates of returns. We’ve built in various tools and scenarios for you to work with and test. You can run scenarios that reflect your dream plan, as well as worst-case scenarios. The course is not just about selling courses, but rather providing you with a valuable planning tool to assess where you are on your financial planning journey.
I want to give a piece of advice to young people like you, Templar. You’re still young at 37, so remember that there’s still a lot of life that will unfold between now and retirement. I often see people in their 20s and 30s saying, “I have a 65% savings rate, so I can back down.” However, it’s important to consider the undefined variables, such as where you will live, what your job will look like, what your family will look like, and what your expenses will be. It’s challenging to make granular decisions without knowing those specifics. I believe that around 40-45 years old, you start to gain a clearer understanding of what financial independence and retirement will likely look like. For someone in their late 20s, early 30s, or even mid-30s like you, Templar, it may be difficult to determine the exact path due to the life events that will unfold.
Contrary to the belief that our content is all about scarcity and cutting back, our tools can also help create abundance. I’ve received messages from people who wonder why they’re taking cheap trips or still buying budget-friendly items. The answer is that I want you to live in abundance and be the best version of yourself. Our tools provide you with the knowledge of where you are, so you can make analytical decisions and live your best life.
