In today's episode, Ari goes over 5 PRO tips from his clients who retired early with complete confidence (not worrying about going back to work or stressing about spending). You'll learn everything you need to know to retire early with total confidence.
Create Your Custom Early Retirement Strategy Here
Ari Taublieb, CFP ®, MBA is the Vice President of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients navigate the nuances of an early retirement.
PS: Before anyone decides to move forward with our services, I want to ensure we're the best fit to help you reach your goals and I personally have the first conversation with you.
In today's episode, Ari goes over 5 PRO tips from his clients who retired early with complete confidence (not worrying about going back to work or stressing about spending). You'll learn everything you need to know to retire early with total confidence.
Create Your Custom Early Retirement Strategy Here
Ari Taublieb, CFP ®, MBA is the Vice President of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients navigate the nuances of an early retirement.
PS: Before anyone decides to move forward with our services, I want to ensure we're the best fit to help you reach your goals and I personally have the first conversation with you.
One of the things I love to do most is talk about all of my amazing clients. Now you all are going to get to hear from them today, even though they're not actually going to be speaking on the podcast Now. In 2024, I am going to be having some current clients come on the podcast, of course with their permission, because they want to talk to all of you listeners to make sure that you get to hear it from them as well as from me. So some fun stuff coming to all of you guys in more detail throughout 2024. But today's video, specifically this podcast, is me going over five successful things my early retirees, meaning my clients who retired early. A lot of you guys, I know, are listening to this right now. Who are these clients, and they're excited that I'm about to share this information because they were the one that provided it to me. I want to make sure that you guys are absolutely understanding what you need to do to put yourself in the best position possible for successful, a fulfilling, a fun, a financially optimal early retirement. So we're going to be going through this fun stuff in today's video. The next podcast I'm going to do are 10 things to avoid doing. So this is almost like a part one, but if you didn't listen to this one and only listen to the other one, it's still going to resonate and be helpful for you. This is a podcast episode that I've been waiting to record for some time. I've been speaking with my clients about this that we could really prioritize. Hey, what do my listeners all really want to make sure that they are hearing, so can't wait to hop in.
Speaker 0:As always, I am Ari Talbley, a certified financial planner, vice president here at Roo and host of the early retirement podcast. With that being said, let's hop right in, and the first one is absolutely having more control over their taxable income. What does that mean? This is the first one that my clients came up with, and the secret here is called the superhero account. It is the brokerage account. It is the joint account. It is the taxable account. It is the account. I have a client that's going to send me a cape that says superhero brokerage, which some of you are going to laugh at and call me a total nerd, which you justifiable here, but the premise is simple when you have a brokerage account, it keeps your taxable income really, really low, so it allows you to not only bridge the gap. If you're retiring it anytime before 59 and a half and you're wondering where's income going to come from and you don't want to use the rule of 55 or any of these other concepts I talk about for an early retirement, is you have control over your income.
Speaker 0:Now, I am big on keeping everything we're going to talk about very simple, because it is very quick that this can become overwhelming, and I do not want that to be the case. So here's what I need you to do. I need you to open a brokerage account and sometimes I tell my clients I don't want you to max out your 401k and they're like what do you mean? I've been maxing out all my life. Look at that great account balance there. I'll say, yeah, you are qualified, rich, cash, poor. You have too much money inside your 401k. And all they hear is too much money and go. That's good, right, I go. You have too much money in the wrong places. I want enough in that brokerage account. So if you want to quit your job or you don't love what you're doing, you can and not subject yourself to taxes and penalties and all these different fees if you have to pull from your IRA or 401k or Roth IRA because you didn't wait long enough. So I want to make sure you have this brokerage account. The brokerage account. Let's assume that you have some positions in there Apple stock, microsoft, amazon. When you take that money out, as long as you've held it for over a year, it's capital gains treatment. Capital gains treatment is much lower than ordinary income treatment more often than not. So the reason I'm telling you this is having that brokerage account that's going to help bridge the gap until you want to actually pull in from your traditional retirement accounts like your IRAs and 401k and Roth IRAs.
Speaker 0:So my clients that successfully retired early they open that brokerage account. They open it up early and they were understanding how much they should save into it so that they don't over save but also don't under save Because in a dream world, my clients, they have a healthy brokerage account $200,000 plus dollars. That's helping them bridge that first few years of a retirement and helping them pay Roth conversion taxes. Dream World were closer to three, four, $500,000, but every client's different. So if you say, oh my gosh, I'm so much lower than what you just said there, am I not going to be okay? No, that's not what I'm saying. If you go. Oh my gosh, I have way more than that. Is that bad? No, it's not bad. It depends what you want to spend, and that is number two. Number two is they had a really, really, really clear mindset over what they needed to spend to be happy. And here's how they did it the first year of an early retirement, I want you to overspend.
Speaker 0:I want you to be a successful spender. This is what my clients and I work on. I want them to almost spend needlessly. And some of you are going, oh my God, that sounds terrible. Why would I spend so frivously? I could use those dollars for better means. I want you to become a successful spender Now. Don't just go spend for the sake of spending. Let's be reasonable. But I want to make sure that you are spending if it can increase your quality of life Now.
Speaker 0:Money cannot do a lot of things. It can do plenty of things, but it cannot just increase happiness tomorrow by you just spending more and more dollars if you already have everything you want. So some of these things I'm going to tell you right now will not be 100% applicable to your situation. But I have one client come to me and go Ari, I'd love to spend 7,000 a month. I said, great, what are you spending right now? This is about 6,000. I said, go spend eight. And they spent eight. And they realized that there's about 500 bucks left over every single month that they just couldn't spend even if they wanted to. This is meaning they're buying appetizers, they're just going out to eat, they're spending extra money on trips. They don't want to fly first class anyway. They simply are saying 7,500 a month. Let's us live our dream. It lets us do everything we want to do. And then some, what do we do? That extra 500?. So you can imagine we looked at gifting strategies and tax planning and all this fun stuff from there. But we first started with how much would they love to spend? They told me 7,000. The real answer was 7,500. They couldn't have known that unless they spent that first year really determining what they need to do to became a successful spender. None underspender, none overspender.
Speaker 0:A lot of you know my bowling analogy, but I'm going to give it to you right now. Okay, a lot of you are going to go into retirement and you're going to go bowling. Now a lot of my clients are. There's a dumb analogy, because I don't love bowling. I'm not a bowler, or any of your clients bowlers, so which? The answer is no, okay, so I could pick a different one, but I like this one, and here's why some of you are going bowling right now and you have a really good chance. You're going to hit seven or eight, maybe nine pins over. That's like having a really good retirement.
Speaker 0:But if you want an optimal retirement, you use the cheat code. And what's the cheat code in bowling? It's putting the bumpers up. The bumpers up tell you here's the most you can spend this year and here's the minimum you can spend, based on what markets are doing. Because what some people do is they're going to go over and they're going to just go bowling and they're going to hit six pins. They're going to take out their monthly income. What they don't know is it might be really windy, which is almost similar to markets being down. I know not a perfect analogy, but the premise is what if you're going bowling and not a perfect analogy, I get it because there's no wind in the bowling alley. But if there were, maybe you were going to hit six pins, but you actually only hit four over because it wasn't a perfect roll and the wind pushed it one way Once again. I know not realistic. The premise is similar what if you're in retirement and markets aren't doing so well?
Speaker 0:How are you changing your retirement strategy? How much are you now going to take? Because remember this client that I just spoke with. They told me they loved to spend 7,000 a month. Really, they loved to spend 7,500 a month and now markets are going to go down. How on earth could they have confidence that they could still spend that if markets are going down? They're really worried and the answer is you don't just close your eyes and take it no matter what. You have a strategy that tells you exactly how much you can take and where you should take it from, and that is completely dependent on, once again, what you want to spend your overall tax location of all your accounts, how much you have in IRAs, roth IRAs, brokerage accounts, rental income, social security. Which is why I'm not just giving you some blanket answer right now, because if you have a million dollars or one and a half million dollars, it doesn't mean here's the formula for exactly how you change XYZ. That's cookie cutter. It completely depends on, of course, your plan. So that is.
Speaker 0:Number two is really dialing in those expenses. I have a cash flow planner that you can see in the description of today's video. If you want to get that and calculate your expenses, be my guest, go ahead and download that. Here's a really big one, okay, number three knowing what you are going to retire to, not simply retiring from. My partner James talks about this on the podcast ready for retirement. He is my business partner. If you don't already know, james Kanol and some of you are joking and you'll go who's James root? Okay, root is the name of the company. James Kanol is my business partner.
Speaker 0:So, retiring from and retiring to a lot of people are going to retire because they are burnt out, they are sick of a job, they don't want to do it anymore. They're in a good financial position, they're going to retire and then, all of a sudden, they're going to know what are they am I going to do? And so I'm going to give you two quick dumb stories. Okay, now, they're real stories, but they are dumb because some of you are going to go. Is that real? But it's real. Okay, I'm telling you.
Speaker 0:These are from my clients, once again. So here's the first story. Client comes to me. Some of you have already heard this. I know my clients have. But if you haven't here, you go.
Speaker 0:First client comes to me. They go all right, cannot wait to retire. I want to focus on golfing. I go great, how long has it been since you've golfed? They go, yeah, a long time. But I just can't wait to get back into it. A lot of you know what I'm going to say here, but they started golfing and they were loving it.
Speaker 0:Then they hurt their back. They call me six weeks later and go Ari, what do I do? I go. What do you mean? What do you want to do? They go. I don't know. I just kind of put all my eggs in basket of golfing and now I don't really know what I want to do. I'm kind of bored. I'm thinking about going back to work. I go. You told me you hated your job. They're like, yeah, but I really don't know what to do anymore and my wife's kind of sick of me. I've never been home this long and so I don't know what to do. So that's just one prime example of you hurt your back in golf. All your eggs were in one basket, and now what do you do?
Speaker 0:I don't want you just having an amazing Roth IRA and 401K and IRA which, of course let me be clear I do want you to have all of those things at very healthy levels, but I also want to make sure that you have true fulfillment in retirement. And a lot of you don't a lot of you and it's because I'm doing these calls all day, every day with you are reaching out to me, and if you don't already know, I am personally the one doing these calls with you. So if you reach out to root financial, I will be the one you're speaking with to financially match make you with who we think is the best advisor for you, and that's, of course, my role. So, with that being said, I want to tell you that it's very real. People are reaching out and they're saying, yeah, I worked a job for 40 years. It was really stressful, I don't know what to do when I retire, and so I'm just going to keep working, and they keep working, even though it's taken a financial toll on their family and friends and relationships.
Speaker 0:So, really getting clear before you retire on what you're so excited or tired to, that's what I had for my number three here. That could be with commuting communities, excuse me, collaborating with others, challenging yourself in a healthy way. What can you do? Not just I'm going to read books, I'm going to wake up at 6am. I'm going to do it, but having a plan. That's how you have a successful retirement. Now, if you are a client of here, with us, at root there's a specific purpose finder exercise. We walk you through to make sure that you do have a plan for both yourself and for your spouse.
Speaker 0:So that's what I have for my third successful early retiree example, the fourth one that I have written down here. Excuse me, this is one I spent a lot of time on and I want to talk about it because it's something that I see too often. I'm going to give you a simple example. Oh sorry, I forgot my second story there. I just interrupted myself there. But my second story, real quick to the retiring to and from is a client came to me and said all right, I cannot wait to retire, I'm moving to Hawaii. Baby, that's what they said, not their accent, and the client listening right now is laughing because they're like I sound nothing like that. But the premise is simple Once again, they want to retire early, they want to successful retirement. They moved to Hawaii. They loved it for six weeks, not forever. Okay, big financial hit when they determine they wanted to move back.
Speaker 0:So the premise is don't go practice retirement. If they want to move it to live in Hawaii and they had made that move before they had come to me we want to make sure that we're dialing that in, that you've practiced it, that you've lived there for some time, that you're excited to move there. A lot of you are going to say, ari, what if I retire and move to a cheaper state? I go, absolutely, you could do that and it's going to save you on taxes. They say great, like, show me how much and I'll show them. They say that looks really good, I like that number. And then I'll say do you want to live there? And they're like no, I don't really know anyone there. But look at those tax savings. I go. Well, it's one thing if you need to live there because financially you couldn't make it if you didn't, versus, oh my gosh, I just want to live there for the tax savings, even though a moving way from all my friends and family. So the premise here leads into my fourth point. Please do not let the tax tail wail the life dog.
Speaker 0:Roth conversions are a big reason a lot of you are reaching out. You want to optimize your Roth conversion strategy. You don't want to do it wrong. You've probably heard about Irma surcharges or Medicare to your look back or the fact that if you do Roth conversion incorrectly it can actually shoot you in the foot, meaning it would have been better to actually do nothing sometimes, which is the case. I have separate videos on that.
Speaker 0:But the premise is sometimes a strategy is why don't you go spend more? That could be a Roth conversion strategy. People go what do you mean? I go well, what if you spent more on your energy? While you have your energy, while you have your health, go travel. That's going to decrease your RMDs because your balance will be lower. And they go yeah, but shouldn't I pull for my other accounts first? I go yeah on paper, but sometimes we've got to get creative here and go, hey, let's not do cookie cutter planning here.
Speaker 0:So here's the way I like to summarize this I want you to take advantage of all of the tax optimal strategies here, but do not prioritize those over your dream life. I want you to go live your dream life and, in light of that, go do great tax work. So the premise is go live an amazing life that's really fulfilling that. You understand you wanna live, whether it's sailing around the world or spending more time in the woods or doing whatever you wanna do. I've got a lot of fun clients out there. Okay, I want you to go do that. I don't want you to go.
Speaker 0:Well, ari, you know you sound really excited about this Roth conversion strategy and because of that I don't wanna disappoint you. So here's what I'm gonna do. I'm gonna no one clients ever said this before but I'm gonna not spend any money. I'm not gonna prioritize my health, I'm gonna just not do it. I'm gonna keep my income as low as humanly possible to optimize my Roth conversions and I assure you you do not wanna be in your 90s or 80s or hundreds going. Oh my gosh, I had the best Roth conversion strategy, but I didn't spend time with my spouse or with my family or building relationships. Roth conversions are awesome, but I've seen it where some people let that, you know, wail their life dog, if that makes sense. So don't let the tax tail wail the life dog. That's what I have for number four and then number five.
Speaker 0:I really like this one because and there's more than this, of course you know I could talk. There's pro tips I'll give you in a second, but this is one I really like and I'll ask clients the following I'll say what is your state plan? And they say I have a trust. And I say that's not a state plan. They go oh, I have a will. I go, that's not a state plan. They go, oh, I get it. Those medical directives, those power attorneys, I have all those. I go, those are parts of an estate plan. What is your plan? To not die with $10 million? And they're like what do you mean? I go look at this. If we invest this way and you do these different things, in your nineties you will have $8, 9, 10 million. And they go that's good, right, I go, yeah, it's good. But I don't know if you want to leave children 8, 9, 10 million bucks, especially if you own your home.
Speaker 0:At the same time, I want to make sure that you are gifting effectively while you are still here. Can you give to communities? Can you set up a foundation? Can you look into donor-advised funds, which I have separate episodes on? Can you look into saying, hey, can I help a child with a down payment, understanding that it's one of those nice things you can do, but you don't have to do it. What I don't want you to do is go gift to children when you're going to be a financial burden by you doing so. Okay, so none of my clients are going gifting unless they're actually in a wonderful position to do that gifting.
Speaker 0:Sometimes I'll just see people say, yeah, I'm going to buy this property for my son and it's going to be so nice of me to do so. They're going to move in there. I'm going to charge full rent and then all of a sudden, you can imagine, their girlfriend moves in. Then they're not charging the same rent because their son lost their job and now, all of a sudden, it's not an investment, so to speak. They're losing money on it and then their child's gonna have to help them in retirement. And you do not wanna be a burden, as I can imagine, because I know I speak with all of you. Oftentimes that's just the case. So, with this being said, effective estate planning is giving. While you're still here looking at communities and some of my clients, they pay for the person's groceries behind them if, of course, they look like a nice person every other week. Other clients of mine say, hey, I'm gifting X amount of stock to my church because that's what really yields an amazing return in my life.
Speaker 0:So these are five things that I went over today that were hopefully helpful as you're thinking through. What do the successful early retirees do? There are a whole lot more. Okay, I did not go over a lot of pro tips that I left out, so I'm gonna mention them briefly, because my client said hey, I already I don't know if these are gonna make your top five, but please mention them which is investing in your physical and mental health, of course, a big one, not just your financial health.
Speaker 0:Learning to accept stuff that's out of your control. Tax brackets are gonna change what is in your control. Looking at Roth conversions, looking at withdrawal strategies, looking at ways to mitigate those through harvesting and tax loss planning Lots of fun stuff. There's stuff that's in your control and there's stuff that's out of your control. And market performance, inflation legislation. These things are out of your control Doesn't mean you just close your eyes. You plan for it, but sometimes the best thing you can do.
Speaker 0:I have a client that forgot their password and they didn't log into their account for six months and of course we are monitoring and doing the trades for them and we were making sure their plan was up to date. But they didn't worry about it and they're like all right. It's the first time, like I forgot my password and kind of felt nice too, because more often than not it's really annoying when you forget your password. I know a lot of you probably can resonate with that statement there. So lots more to this, of course, but dialing in those expenses making sure you have a brokerage account, retiring to not just from something, estate planning, as I mentioned, and not letting that tax tail wail the life dog. So I hope that this was a helpful episode for all of you.
Speaker 0:A big fun announcement, which is anyone that is reaching out, you are speaking with me. So if you reach out and you're looking for planning, we just can't wait to get started because it's what we love to do. So the goal of our first call is number one I wanna get a clear sense of what you're looking for. Number two, and of course, if you're a client, no need to listen to this, cause you know the spiel here. But number one is get a clear sense of what you're looking for Are we best positioned to help?
Speaker 0:Some of you are listening right now going, hey, I don't know, like, what do you do? We don't just do investment management. So if you're just looking for someone to just tell you what ETF to pick and have a nice day, that's not what we do. We're very transparent about that. Number two is I wanna show you a process. Here's how we help. Here's how we dial in the plan of every aspect purpose, income, investments, tax security and then, finally, I wanna find you the right fit here. I want you to find the right fit at root financial, who would be the dream advisor for you, and that is my job. So I'm asking you questions to find out who is that right fit.
Speaker 0:So hopefully, this once again podcast episode was helpful. I kindly ask if it was even remotely helpful, please leave a review on iTunes or drop a comment on YouTube. It helps more people find the show and I just cannot be more grateful. So thank you all and that's it for today's episode. Love you guys. Thank you for listening to another episode of the Early Retirement Show. If you have a question that you want answered in a future episode, you can always go to my website, earlyretirementpodcastcom. That's earlyretirementpodcastcom, and you can go ahead and submit a question that I'll look to answer in a future episode. Thank you all for listening. Please do rate it, review it and share it with someone who you think would benefit from this information. If there's anyone out there that you know, I certainly appreciate it and I will see you all each week. Hey guys, it's me again. Please be smart about this. Nothing in this podcast should be construed as financial, tax or legal advice. Consult with your tax preparer or financial advisor before taking any action. This podcast is for informational purposes only.