Why Building Wealth and Using Wealth Are Two Different Disciplines
Accumulation rewards consistency
During the working years, the basic assignment is familiar: earn, save, invest, remain disciplined, and give compounding time to work. Market declines can be uncomfortable, but continued contributions and a long horizon may help an investor remain focused on the future.
Using wealth changes the assignment
Once regular paychecks stop, withdrawals begin replacing contributions. Taxes, inflation, market sequence, longevity, healthcare, liquidity, and legacy all begin interacting. A person is no longer only asking how to grow assets. The question becomes how those assets can reliably support life.
A portfolio balance is not an income plan
A large account value can create confidence, but it does not by itself explain how much can be spent, where income should come from during difficult markets, or how competing priorities will be coordinated. Rules of thumb can provide a starting point. They cannot account for every person’s circumstances.
The structure may need more than one tool
Investments may provide growth and flexibility. Cash reserves may create time. Protection may help preserve the plan when life changes. Social Security, pensions, and other income resources may support essential spending. Different dollars can do different jobs.
The better retirement question
Instead of asking only, How much have I accumulated?, consider asking: How can everything I have built work together to support the life I want to live? Building wealth and using wealth are connected, but they are not the same discipline.
By Fred Kettler • The Stewardship Project
With Thanks,
Fred