The Long Arithmetic: Issue 1

Most high earners are waiting to feel wealthy.

They have maxed the 401(k) for 15 years.

They own the house.

The brokerage account has a comma in it, sometimes two.

By any reasonable measure, they are doing well.

 And yet, when you ask them whether they have enough, the answer is almost always: no, not yet, maybe in a few more years.

The strange part is that the number of years does not shrink. It stays a few more. A physician who told me “five more years” in 2015 told me “five more years” again in 2022. The math had changed substantially. The feeling had not.

This is what I see in that pattern: enough is not a feeling that arrives. It is a number you calculate, review, and then decide whether to believe.

The reason most people wait for the feeling is that the feeling is easier. Calculation requires specifying what you are actually planning for. Retirement at what age. A lifestyle at what annual cost. A margin for medical reality you cannot predict. A provision for the people you are responsible for beyond yourself. A set of assumptions about return, inflation, and longevity that you are willing to defend.

Most people do none of this because each of those numbers forces a question they would rather not answer:

•      What age do I actually want to stop working? If the answer is never, what does that mean for how much I need?

•       What lifestyle am I planning for? Is it the one I actually want, or the one I think I am supposed to want?

•       How long am I planning to live, and how confident am I in that number?

•       Who am I providing for, and for how long?

When these questions sit unanswered, the calculation cannot be done. And when the calculation cannot be done, the feeling of enough never has a number to compare itself against. So the feeling keeps waiting for an external signal (another promotion, another milestone, another good year in the market) that will never actually arrive, because the signal was never going to come from outside. It was always going to come from the math.

This is how I evaluate it for my own family. I do it in three steps, and I do it again every two or three years because the inputs change.

Not a budget. A specific annual figure that reflects the life you actually want to live, including the parts you are quiet about: travel, helping aging parents, supporting causes, occasional generosity to people you love.

This number is usually 30 to 40 percent higher than the budget most people have in their head, because most people have been quietly underestimating what their actual life costs.

A realistic number of years you are planning for, with an honest estimate of longevity and a margin for the ways that estimate can be wrong. Most people plan for a too-short horizon because the alternative is uncomfortable.

This is where most calculations break. A financial advisor’s 7 percent assumption looks very different when you ask what 7 percent net of fees is, net of taxes, net of inflation, and net of the sequence risk that matters most in the first decade of withdrawals.

I have run my own version of this calculation more than once over the last decade. Each time, the assumption I started with was too generous. Not by a little. The honest number that holds up under the four filters above is meaningfully lower than the one most advisors quote, and the resulting N is meaningfully larger than what I had told myself a few years before. The math humbles you, if you let it.

Putting it together:

From those three inputs, the target portfolio comes out. Multiply lifestyle by horizon-adjusted multiplier, back out a margin for the return assumption being wrong, and you have a number. Call it N.

N is enough. Not the feeling of enough. The number.

The calculation is not the decision. The calculation is the thing that makes a real decision possible. Before it, you are responding to a feeling. After it, you are responding to a fact.

Some people calculate N, realize they passed it three years ago, and keep working because they love the work. Others realize they passed it and stop the next quarter. Others realize they are further from N than they thought and restructure accordingly.

And N is not static. It moves as your lifestyle assumptions change, as your horizon updates, as return assumptions get revised by reality. I recalculate mine every few years. Most of the people I know who have done this once and trusted the answer for a decade have ended up with an answer that no longer fits the life they actually built.

The most common mistake is waiting for the feeling instead of running the math. Fifteen years from now, with a much larger account, the uneasy relationship to your own wealth will feel exactly the same. Unless you anchor it to a number. The feeling does not arrive on its own. It arrives, if at all, on the other side of the calculation.

The second mistake is using a budget instead of a lifestyle number. A budget is what you track. A lifestyle number is what your life actually costs, and it includes the parts you tend to undercount: generosity, aging parents, the travel you keep deferring, the help you want to give your adult children later. The lifestyle number is usually 30 to 40 percent higher than the budget. That gap is where the miscalculation lives.

The third is planning for a too-short horizon. Planning to age 85 when your family history suggests 92 is not conservative. It is a bet you are quietly making against yourself. The cost of overestimating how long you will need money is small. The cost of underestimating it is not recoverable.

The fourth is trusting the brochure return. 7 percent gross is not 7 percent net. The gap between the two is large enough to swallow most of what you thought your assumptions left you. If the number your advisor uses does not account for fees, taxes, inflation, and sequence risk, the number is wrong.

The fifth is calculating N once and never revisiting. Your life changes. Your number should change with it. Most of the people I know who have done this calculation once and trusted the answer for a decade have ended up with an answer that no longer fits the life they actually built.

This is the question to ask yourself: what is N, and how far are you from it?

If you do not have N, you cannot know whether you have enough, because enough was never a feeling. It was always a calculation you were avoiding.

Here is the framework, step by step:

1.     Calculate your lifestyle number. Include everything: the visible expenses and the quiet ones. If the number surprises you, it is probably closer to the truth than your budget.

2.    Set your horizon honestly. Add a margin. The cost of overestimating how long you need money is low. The cost of underestimating it is catastrophic.

3.     Calibrate your return assumption. Net of fees, taxes, inflation, and early-withdrawal sequence risk. If the number your advisor is using does not account for all four, the number is wrong.

4.    Derive N. Lifestyle × horizon-adjusted multiplier, with a margin for the return assumption being wrong.

5.     Decide what to do with the answer. That part is yours.

Enough is a number. The feeling will come after the math, if it comes at all.

Most of the people I know who are waiting for the feeling to come first are still waiting, 15 years later, with a much larger account and the same uneasy relationship to their own wealth.

The Find Your N worksheet is available via the link below: it is the calculation this issue walks you through.

Disclaimer: This is not financial advice. Consult your CPA or licensed advisor before acting on anything specific to your situation.

Until Monday.

Alina