Some 14% of workers who earn $100,000 or more say they are living from paycheck to paycheck. Last year, many upper-income workers either stopped participating in or reduced contributions to their 401k and other employee retirement savings plans. However, 56% of those surveyed said they would not give up their internet connections, despite financial troubles.
Social Security makes up the majority of retirement income for 60% of retired Americans. And for retirees in the top 40% of household income, it still accounts for almost half of their retirement income, according to the Social Security Administration.
Financial independence is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high.
I have been in the financial coaching and consulting business for more than 30 years. A compelling majority of the retirees I work with did not win the lottery, strike it rich because they bought Apple stock (or some other wonderful stock) before it was discovered, or inherit a boat-load of money from a wealthy relative.
Most of the people we work with do not live in expensive upscale neighborhoods. In fact, if you were to meet them, they would not appear to be highly affluent. They appear to be relatively ordinary people who are prudent, hard-working and generous. Many of them accumulate over a million dollars of personal net worth before they retire. But you would never know this by looking at them.
Who becomes financially independent in retirement? It is not people born with a silver spoon in their mouths. It’s people who live below their means, who decide to invest something out of every paycheck, and who believe that financial independence is more important than displaying high social status. They believe in delayed gratification.
Building wealth takes personal discipline, hard work and time. It also helps if you avoid shooting yourself in your proverbial foot with some sort of foolish financial decision.
For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s newest white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.