Retirement Goals: Be Rich Or Be Wealthy?

By September 6, 2020 No Comments

Co-produced with Treading Softly

Retirement for many seems like a far-flung idea. When you’re in the midst of the day-to-day life, the idea of being work free and financially stable seems as real as Santa Claus. Yet it’s during the daily grind that you lay the groundwork for how you will spend your retirement.

Fixing a Goal Post on Retirement

Retirement Gurus often set various goalposts for a “successful retirement,” but according to a study by Schwab, most Americans believe they need $1.7 million. With the pandemic hitting the globe, the same survey conducted recently that figure moved up to $1.9 million. Interestingly, the answers to these surveys is a set dollar amount. Not a figure of income, but of assets. I need $X to retire comfortably as if money is hoarded and only gets spent, never received.


We have a Scrooge McDuck issue when it comes to Americans and retirement. We keep thinking in terms of assets and not income. It’s not surprising as bank interest yields are so incredibly low and Treasury Note yields don’t even beat inflation, that many are thinking of piling their cash. Investing that cash seems foreign and risky for a supply so precious. Yet the other issue at hand is that so very few have $1-2 million on hand when they turn 65 that most simply capitulate when it comes to retirement saving and investing.

After the Great Financial Crisis, the rate of capitulation among retirement savers grew:

A new report from the Deloitte Center for Financial Services, which found that 60% of pre-retirees believe healthcare costs will consume their savings no matter how much they save. Similarly, 39% believe investment returns won’t be high enough to provide decent retirement income regardless of how much they manage to put away.

Deloitte found exasperation at every turn: 58% don’t have a retirement plan; nearly 40% don’t know what an annuity or mutual fund is; and 20% expect to rely purely on Social Security for their retirement needs. More than half don’t trust anyone’s advice.

Source: (March 2013)

These are some interesting data from the year 2013:

  • 39% of pre-retirees were thinking their efforts were futile.
  • 58% were saving blindly.
  • 20% were expecting to depend on the government for all their needs. These retirees will have the biggest shock coming, as we covered previously in an article here on Seeking Alpha.

I wouldn’t doubt that the COVID-19 recession and fears have only recreated similar feelings among a new set of savers. This explains why only 55% of Americans are invested in the stock market through themselves or their spouse. The percent of invested Americans has fallen below historic norms.

Source: Gallup

The issue here in my humble opinion is how we’re setting our goal posts. Retirement gurus, financial firms, and often advisors focus heavily on the dollar value of assets vs its benefits.

Stop Hoping to Get Rich

Just stop it. Give it up.

Getting Rich is as solid of a goal as getting old. Neither serves an end purpose. Being rich is a state of being, just like being old. You can win the lottery, be rich, spend it frivolously and be poor again.

A simple Google search of past lottery winners shows that sudden financial windfalls do not beget success for most.

Why is that? It’s simple. Being rich shouldn’t be the end game. What happens then? You’re rich. So what’s next? Often the answer is not as easy to come by for those who have spent countless hours stockpiling assets and cash.

The issue with tying a goal to a Static Wealth target is that Static Wealth should be the tools you use to build your life, not your lifelong goal. Rich is generally considered as having a net worth of $2.3 million.

You can be rich, and not wealthy. Likewise you can be wealthy but not rich. You can also be rich AND wealthy.

Rich Vs. Wealthy

Some of you are probably thinking that I’m about to split hairs here. Yet we often hear the term “lives of the rich and wealthy” and do not give it a second thought.

When discussing wealth or money, we here at High Dividend Opportunities break it down as Static vs. Functional – essentially its worth vs. its income generation. We seek investments that have relatively stable Static wealth but produce high levels of Functional wealth.

Think of your house, if you own one, when you purchased it, you were given a quoted appraisal – that was the house’s Static Wealth at the time. The benefits of shelter, protection, enjoyment of its features are all Functional Wealth. It’s generating wealth or benefits for your life outside of cash. Rarely do you seek a daily appraisal to determine the value of your home or panic sell it cause its tangible value has “dropped too low” or due to a need to “preserve capital.”

Being rich equates to your overall net worth, but not your income stream. Some people have large income streams and an excess amount of income, yet have very little net worth. Those people are wealthy. You can have zero income and a large net worth and be rich. Often the wealthy become rich over time, as their outsized income produces an outsized net worth.

Wealthy people do not have to stress over every dollar spent since they know their income stream is stable, steady and recurring. Rich people must worry about every dollar spent, as once it’s gone it’s unrecoverable.

Unfortunately we have been putting the cart in front of the horse. We aim to have the cash pile but fail to realize that the ability to generate more cash is more important than having a pile of it.

Get “Wealthy” to Have a Rich Retirement

We need to get into the mindset of being wealthy for our retirement. Recognizing that a larger income stream is more important than having a large pile of money.

This sets you up on a manageable path of success. You can set goals for the desired level of income generation. These goals will vary based on your lifestyle and expenses. Those of you who want to live in Florida will have a very different cost of living vs. those of you who want to live in Thailand. Likewise, if you travel or stay home will change your income goals.

The beauty of investing for income is that in your pre-retirement years as your income from dividends and interest comes in, you can re-invest them helping to rapidly grow your portfolio. So now, not only do your own contributions grow your asset base, but so does your portfolio itself. Each dividend begets more dividends. Slowly at first but rapidly over time your income stream will grow from a trickle to a roar.

You’ll be surprised that having a larger income stream will more often then not lead to a larger net worth. Why? Because that excess income keeps generating more. This means if you must spend some of your income on expenses, perhaps more than usual, you are not dipping into the capital generating your income stream.

You got this. We can help. First step is to focus on the right aspect of retirement saving – your income stream from your savings, not the asset value.

Next time, we will discuss how to focus deeper on investing to be wealthy, not just rich. Scroll up and click the “Follow” button so you won’t miss it!

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Treading Softly, Beyond Saving, Trapping Value, PendragonY, Preferred Stock Trader, and Long Player all are supporting contributors for High Dividend Opportunities.

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