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A few years back, a big financial firm was running around with an ad that asked, “what is your number?” This ad has stuck with me for a while for a few reasons, the biggest being its incorrect focus. The commercial insinuated that saving and hitting a “number” should be the biggest focus of your retirement.

That couldn’t be further from the case. Allow me to explain why. 

  • Lets look at two couples. Couple A has $200,000 in their retirement nest egg. The husband retired from a job where he has a modest pension, about $15,000 a year and the wife was always a stay at home mom. The husband is 67 and the wife is 66. He collects $2100 per month on social security, she collects a spousal benefit of $1000. Between the two, they bring in just over $4000 in pre-tax income. Their house is paid for, they have zero debt and they live a modest retirement life where they vacation once a year and rarely dip into their savings. 
  • Couple B has $1,100,000 in retirement savings. The husband retired from a sales profession with no pension, but he collects about $2500 per month in social security. The wife had a career as an HR professional, and her social security is $1900 per month. They have a mortgage on their house of $300,000, as they refinanced in 2013. They take a few vacations a year, have almost $25,000 in credit card debt, and rarely stick to a budget. Annually they spend in excess of $100,000, as their advisor told them they can afford to take 6-7% a year from their portfolio. 

Which couple do you think has a better chance of running out of money over their lifetime?

The answer of course is couple B, who has no control over their spending and their debt. If you want to look at one of the biggest factors I see causing couples heartache in retirement, it’s not how much they have saved. Its how much they spend based on how much debt they have. Controlling your debt in the years before retirement is what could potentially make or break your retirement. 

Going forward, as you are planning for your retirement, ask yourself, what do we need to do to get out of debt before we retire.

Answering that question is more important than answering, “what is your number?”

*This is a hypothetical example and is not representative of any specific investment. Your results may vary.