Is Net Worth the Right Goal for Your Retirement?

I recently facilitated a financial literacy game with a friend, and it gave me a surprising insight into how people approach financial planning, especially as they get closer to retirement. The goal of the game was simple: achieve the highest net worth possible. We all know that net worth is calculated as assets minus liabilities, so logically, increasing assets or reducing liabilities, or ideally both, should be the main focus.

But one participant’s approach made me rethink whether net worth is really the right goal for everyone.

A Mid-50s Perspective on Financial Success

Among the players was a woman in her mid-50s who approached the game quite differently from others. While many participants were focused on aggressively acquiring assets and minimising debt, she took a different route. Instead of chasing high-value investments, she gravitated toward opportunities that allowed her to earn additional income through side gigs. These opportunities significantly increased her cash flow, giving her a sense of security and excitement.

Even though she didn’t achieve the highest net worth by the end of the game, she was visibly happy. The additional income streams gave her confidence, knowing she had a steady cash flow to support her lifestyle. Watching her excitement made me realize that financial success looks different for everyone, especially as they move into different life stages.

This experience made me reflect on how often we fixate on net worth as the ultimate measure of financial success, when in reality, priorities shift over time.

How Financial Priorities Change Over Time

When we’re younger, financial goals often revolve around building wealth, accumulating assets, and growing our net worth as much as possible. The focus is on long-term growth and preparing for an unknown future. But as we get older, the definition of financial success begins to change.

In our 50s and beyond, financial security and stability become more important. Regular cash flow starts to outweigh the desire to amass a large net worth. Having money coming in consistently for daily expenses, healthcare, and lifestyle choices provides a greater sense of freedom and peace of mind than having large but illiquid assets.

However, it’s important to remember that side gigs and additional income sources are not always permanent. Opportunities that exist today may not be available tomorrow due to changes in industry trends, health, or personal circumstances. Relying too heavily on them without a solid financial foundation can introduce uncertainty.

Net Worth vs. Financial Security

We often hear about net worth as the ultimate benchmark of financial health, but is it the full picture? Having a high net worth might look great on paper, but if most of it is tied up in illiquid assets like property, it doesn’t necessarily translate into financial freedom.

A useful analogy is to think of net worth as the size of your fridge. You might have a large fridge stocked with expensive ingredients, but if you don’t have a regular supply of fresh groceries coming in, you could still feel financially insecure. On the other hand, having a steady stream of fresh groceries—your cash flow—ensures you can comfortably enjoy life without worry.

For retirees, cash flow is crucial. It helps cover everyday expenses without needing to sell off investments or worry about market fluctuations. It allows for flexibility and spontaneity in retirement, whether it’s taking a trip, helping family members, or handling unexpected medical costs.

Key Takeaways from the Game Experience

Reflecting on the game, I realized that financial success isn’t a one-size-fits-all formula. What works for a young professional in their 30s won’t necessarily work for someone approaching retirement.

The mid-50s participant taught me some valuable lessons:

1. Cash Flow Brings Flexibility: Having steady income streams can provide a sense of security that a high net worth alone cannot.
2. Financial Goals Should Reflect Life Stage: At different points in life, our financial goals should adapt to match our needs and priorities.
3. Success is Personal: It’s important to define financial success based on what matters most to us rather than following conventional wisdom.
4. Diversification is Key: Relying solely on side gigs for income can be risky. A balanced approach with investments, savings, and diversified income streams is essential.

She may not have won the game, but in real life, her approach to prioritising cash flow might be the key to achieving true financial freedom, if balanced with the right long-term planning.

How to Reassess Your Retirement Goals

If you’re nearing retirement, it might be a good time to rethink your financial goals. Instead of focusing solely on building a larger net worth, consider strategies that provide reliable cash flow to support your lifestyle. This could include:

• Exploring passive income sources such as rental income or dividends.
• Taking on side gigs or part-time work that align with your interests while being mindful of their temporary nature.
• Ensuring your retirement accounts and annuities are structured to provide a steady income stream.
• Maintaining a balance between liquidity and long-term investments to cover unexpected events.

Retirement should be about financial freedom, not just accumulating wealth for the sake of it.

What’s Your Retirement Goal?

This experience made me realize that success looks different for everyone. Maybe it’s time to rethink the way we measure financial well-being and focus more on what truly brings us peace of mind.

Are you focusing on the right financial goal for your retirement? Do you prioritise cash flow over net worth, or vice versa?

I’d love to hear your thoughts. Let’s start the conversation.