Push-ups and Preparation…
In my group of friends (male friends in particular), I’ve learned that there are two time-tested ways of settling arguments. I’m not talking about logic and reason, I’ve learned that those are “for the weak”. I’m talking about arm-wrestling and push-up competitions. Obviously, if you are stronger than the other person, then you deserve to be right. It makes no sense, but it’s an unwritten rule that’s been etched into our society.
Maybe you’ve noticed this as well, but the winner is not always who you thought it might be! That’s because there are tricks and technique involved in both of these activities. When arm wrestling, you have to know how to twist your wrist and leverage the mechanics of your arm’s structure. For the record, I don’t claim to be an expert in this area. With push-up competitions, well, you want to go last. Why?
If you’re the first guy to do push-ups, you have no idea what the others are capable of, so you just have to do push-ups until you drop. There’s no goal and no finish line, because those that come after you just might be able to do one more than you did. Since there’s nothing to beat, there’s less reason for you to do one or two more when you’re tired. If you’re last, you know the number you have to get to, so all you have to do to win the competition is top that number. That’s the requirement, and once you’ve surpassed it by one repetition, you can stand up and claim that you could’ve easily done 10 more.
Image from Gordon Cowie on Unsplash
It's psychology. It’s also why 75% of America is stressed out about their personal finances and wondering how they will ever retire. Admittedly, that number is from a random source on the internet, but everywhere I look, the number is high! So, how is the previous paragraph related to these nervous Americans?
Well, there are many uses of money, but spending it is definitely more exciting than investing it to most people. If you’ve got money left over from last month’s paycheck, it’s much easier to buy that chair you’ve always wanted than it is to dump it into an IRA to sit for 20-30 years. In the back of their mind, everybody knows that money they put into the boring “For later” bucket comes out of the fun “For now” bucket. You have to fund your future with money from the present, but nobody knows how much is enough! If that describes you, spending now makes you feel guilty because you suspect you might not be saving appropriately.
You feel like you’re doing financial pushups for your whole life, because there’s no goal to beat, and the targets you set for yourself are largely arbitrary or based off guesswork (like going first in the competition). You’re now competing against inflation, future surprise medical bills, increasing healthcare costs, etc. The list goes on and on. Most people want to retire as soon as they can, but they’re also terrified of running out of money before they die, so they stand teetering on the middle of that seesaw and worry.
Image from Mihaly Koles on Unsplash
It used to be that the ultimate number to “shoot for” was a million dollars. If you had that amount, then you were all set for retirement. That’s not necessarily true anymore! Here’s a little trick used in the investment advisory industry, it’s called the “4% rule”. This rule states that you should be able to live off 4% of your savings a year in retirement. If you’re doing the math, that’s $40,000 a year if you’ve saved $1,000,000! That’s below the average income for Americans in 2024 ($59,228 according to Fidelity.com).
For the record, based on what you’re invested in, you could possibly withdraw more. In this instance, “rule” actually means “rule of thumb”. The reason behind this is that 4% growth of a portfolio is reasonably sustainable, meaning your investments should be able to grow that amount reliably year over year. If you’re gaining 4% and withdrawing 4% every year, you’ll never run out of money. To find the rough amount you’ll need to retire and maintain a certain lifestyle, divide the amount per year you’d like in retirement by 0.04. For example, if I would like to live off of $100,000 a year when I retire, the portfolio value I need is $2.5 million (100,000 / 0.04).
Obviously there are many variables and moving parts to this, and each person’s situation is different. If this is something you find yourself worried about, reach out to a financial planner. If you’re young and therefore not worried about this yet, my advice is to get started now, time is temporarily on your team!
This week’s quote:
“If you don’t make time for your wellness, you will be forced to make time for your illness.”
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