You get a check for your net worth, say $4 million, but can never earn money again. You can deposit it and live off it forever, but that's all you'll ever have. The thought experiment forces you to think hard about how you'd actually spend and budget a finite amount for the rest of your life.
Imagine someone comes to you with a check for that number. Let's say your number is $4 million. All right. And I write you a check for $4 million. So here you go. Here's $4 million. You can sign the back of it, deposit it in your account today, and you are now worth $4 million. Here's the catch, though. Once you do that, you can never earn money on planet Earth again. You can never work for gainful employment. These— this is your last $4 million. So Cool, you're a multimillionaire now. You've got plenty of money to live on. But then how do you manage that money and how do you spend that money for the rest of your life knowing you can never earn more? When you pause and think about that, that's effectively what a retiree is facing when they get to retirement, hypothetically, you know, that point of financial independence or retirement is they've earned their last dollars.
