What ties all four of the processes I discuss together?

Answer: A philosophy based on wealth.

What is wealth?

Wealth is not about being rich. Instead, it is having sufficient assets, combined with Social Security (and pension if you have one), to sustain your current standard of living. Wealth is measured by your spendable net worth. This does not include your home since that is not spendable; though, your home's value may be held as a reserve asset for future contingency planning or backup retirement income to supplement income.

Spendable assets can generate both growth and income to support your standard of living. We participate in the economy while we work through our productivity for which we are paid. This represents income.

However, once retired, since we are receiving no further income from employment, we participate in the economy through spending Social Security, pensions if any, and accumulated assets. These assets, which represent our saving and investments, keep the economy running by providing the funding sources for businesses. At the same time, those who aren’t retired are working to keep those companies competitive and profitable so your investments continue to have value.

In other words, in today's economy everyone's wealth depends on someone else's productivity. This is even so for savings in a bank which wouldn't exist without other people's efforts to keep the bank competitive.

So the objective is to sustain your standard of living from your working years into your retirement years ... to replace income earned from productive work, to income earned from the depletion of invested assets.

A few may generate productive work by starting their own company. In this case, both income and an asset are generated in the economy. For those not creating companies though, the modern method is to invest in companies that have already been created.

With this in mind, a broad approach to investing is prudent in order to diversify across not only companies, but across global economies as well. This is the fundamental idea behind my book Wealth Odyssey. My book describes how to approach financial planning from a net worth perspective. The big picture for retirement is to accumulate, manage, and distribute assets over time.

Based on decades of academic research **, I believe that markets are efficient and that risk and reward are related. This has substantial implications for constructing an investment portfolio. This research is much more in-depth, rigorous, and peer reviewed than that of Wall Street research. This approach is explicitly important to your investment portfolio since it ties into your accumulation and measurement of wealth.

I also employ  a methodology supported by ongoing decumulation research which provides the metrics to monitor and measure progress as you live on your assets throughout retirement. I have established decision rules to assist us when markets misbehave, as they did in 2000, 2001, 2002, 2007 and 2008, which are important to help determine what to do without irrational and emotional reactions so you may remain calm during such storms.

Under the above philosophy, the objective of investing is to increase your net worth, or wealth, so it may support your consumption later. The objective of working is to earn money to support your consumption now. Many consumers confuse these two objectives.

Based on the above philosophy, there is one singular value for retirement savings that may be derived from your specific, and unique, standard of individual living.

The focus of our planning approach is on how to sustain and protect your unique standard of living. A focus on growing net worth is how you may make work optional ... isn't this a definition of retirement?

Science of Evidence-Based Investing >>

** Investors should consider the investment objectives, risks and charges and expenses of the funds carefully before investing. The prospectus contains this and other information about the funds. You may contact Larry Frank to obtain a prospectus which should be read carefully before investing or sending money.