Create Your Custom Early Retirement Strategy Here
MyoDetox -> FutureProof your body and book a session at Myodetox today.
Decrease tension, reduce pain, better align your posture, and increase your range of motion while building your strength. Mention "ER Pod" or "Early Retirement podcast" when you book!
Ever feel like an early retirement is a distant dream clouded by financial fears and the 'what ifs' of life? Kick those mental roadblocks to the curb as we dissect the myths and realities of hanging up your work boots ahead of schedule. We don't just scratch the surface; we go deep into the psychology of early retirement, introducing you to "financial independence, recreational employment." It's a twist on retirement that could redefine your golden years, encouraging you to find joy in activities that resonate with your passions.
This episode isn't just about the 'why' of early retirement; it's also about the 'how.' We navigate the complex world of withdrawal strategies, steering clear of a one-size-fits-all approach to discuss the nuances that make your retirement as unique as you are. We'll talk about how to tailor your financial plan to be responsive to life's unpredictable twists, and I'll show you how to wield control over the aspects of retirement planning that are firmly in your hands—your spending habits and investment choices.
As we wrap things up, you'll hear real stories from clients who've turned their retirement dreams into reality. We discuss everything from dynamic withdrawal rates that fund once-in-a-lifetime adventures to savvy Roth conversions that make market downturns work in your favor. If you're looking for a compass to navigate the sometimes choppy waters of early retirement planning, this episode is your North Star. Remember, you've got the helm, and with a bit of strategic guidance, you'll be charting a course toward an early retirement that's as financially stable as it is personally fulfilling.
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.
Create Your Custom Early Retirement Strategy Here
MyoDetox -> FutureProof your body and book a session at Myodetox today.
Decrease tension, reduce pain, better align your posture, and increase your range of motion while building your strength. Mention "ER Pod" or "Early Retirement podcast" when you book!
Ever feel like an early retirement is a distant dream clouded by financial fears and the 'what ifs' of life? Kick those mental roadblocks to the curb as we dissect the myths and realities of hanging up your work boots ahead of schedule. We don't just scratch the surface; we go deep into the psychology of early retirement, introducing you to "financial independence, recreational employment." It's a twist on retirement that could redefine your golden years, encouraging you to find joy in activities that resonate with your passions.
This episode isn't just about the 'why' of early retirement; it's also about the 'how.' We navigate the complex world of withdrawal strategies, steering clear of a one-size-fits-all approach to discuss the nuances that make your retirement as unique as you are. We'll talk about how to tailor your financial plan to be responsive to life's unpredictable twists, and I'll show you how to wield control over the aspects of retirement planning that are firmly in your hands—your spending habits and investment choices.
As we wrap things up, you'll hear real stories from clients who've turned their retirement dreams into reality. We discuss everything from dynamic withdrawal rates that fund once-in-a-lifetime adventures to savvy Roth conversions that make market downturns work in your favor. If you're looking for a compass to navigate the sometimes choppy waters of early retirement planning, this episode is your North Star. Remember, you've got the helm, and with a bit of strategic guidance, you'll be charting a course toward an early retirement that's as financially stable as it is personally fulfilling.
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.
A lot of you are actually in a good spot to retire early, but you have head trash. What is head trash? Head trash is my example of when you're going hey, I think I'm in a good spot to retire early, but I don't know, because I'm just scared to death to have to go back to work. I don't want to turn in my notice and be wrong and have to end up going back to work there or somewhere else, when maybe I am just really in a spot where I really don't want to work ever again, or I have to take another role and I'm just not suited for that role at that time, because I've now spent so many years doing something I want to do and now I'm back on someone else's clock and schedule and you don't want that. And so here's my example for all of you, because at the end of today's episode you are going to have total clarity so that you don't have any of that head trash. So today I'm going to be tacking a lot of the myths that people talk about in an early retirement, but specifically in relation to ever going back to work. Because, it's true, you're a human, I don't work with robots, and the people reached out to me are like, hey, I'm in a good spot, but I just don't retire too soon and I don't want you to retire too soon either. And if you don't know my made up definition the fire movement which is financial independence, retire early it's a big movement going on where a lot of people are saving and investing to a really healthy degree sometimes a dangerous degree where they'll get a second or a third job just so that they can retire. And they do retire and it's hey, what am I going to do with my time? Am I going to have fulfillment? Am I going to have purpose? Then there's others of you that are like, hey, I don't want to retire in my 30s or 40s, I want to retire. I just want to do it with confidence. I never want to go back to work, and that's most of you that are reaching out. And so I made a new definition Instead of financial independence, retire early, I say financial independence, recreational employment. Most of you don't want to do nothing. You want to do something. You just want it to be fulfilling, whether it being on a board of a company or whether it's doing part-time work at Starbucks, where it's a whole lot less stressful. You want to enjoy your life, never have to feel like you have to go back to work. So how do we do that? That's what we're going to talk about in today's episode.
Speaker 1:Here's the analogy that I want to start with, and I tell this to my clients. A lot of my clients already know this, but, very simply, some of you are in the I don't know phase. I'm not saying all of you, but some of you. Now, I'm a soccer player and I am not fun to be around when I get hurt. My partner says I'm worse than hangry, and a lot of you know what that is, but hangry, hungry and angry Until I get my MRI. The MRI tells me the severity of the injury. That's almost like a financial plan. Then that doesn't solve it right then and there, okay, great, I've got my MRI. I've got a physical therapy on an ongoing basis to make sure I'm servicing my injury and can get back to being healthy. Go back on the field. Same thing here. That's what I've.
Speaker 1:You work with a planner is like Now when I'm looking at specific plans for people. It's not me saying, yep, this is the date. You can, you know, absolutely retire. I'm giving that feedback to say here are your options? Do you want to retire at this age and spend X amount? And then they're telling me, yes, I absolutely would love to spend X amount, or no, you know what, for my true retirement, I really need to make sure that there's no wiggle room there. I'm just going to sleep better. I need to know if markets do XYZ, I'm still going to be okay. I say great, everyone has a different threshold, which is why I tell everyone I hope you marry your partner forever, even though I know very clearly everyone doesn't. But I don't want you to marry your asset allocation. I don't want you to marry your social security strategy. I don't want you to marry anything. I actually want you to be very dynamic with your withdrawal strategy.
Speaker 1:And if you are going to retire early and you're saying I really never want to go back to work, you have to be a little bit comfortable being uncomfortable, and a lot of my coaches said that back in the day and I was like, yeah, I hear you, but where's the logic in that? But I get it now and I'm telling my clients. They'll say, hey, when should I collect social security? I go here's what we're planning on. But if there's a significant health event or if we determine for a tax purpose, we want to do this Roth conversion, we're going to push that back. Are you okay with that? And some people are like no, no, no, I'm not comfortable with that. I need to know in five years, when my social security is getting turned on, I go, you can do that and there's nothing wrong with that. But that's almost like the 4% rule, and so a lot of what I'm going to talk about is in relation to this withdrawal rate number is this should dictate a lot of what's going to cause success or failure in your early retirement.
Speaker 1:If you are worried about going back to work, here's what you're actually saying You're worried that in the future, markets aren't going to do well and you're not going to have enough money. You're worried that markets are going to do well, but you're going to find that you're going to want to spend more because you're loving these trips in retirement and you're really not sure if your retirement expenses are dialed in. So you need to get really confident about what is in your control. Well, what is in your control? You can control your spending in retirement. You absolutely can control your overall allocation. You can't control what it's going to output, but you can control what amount you want, and things that are going to grow for you, like equities, what are going to stay more stable, like fixed income. There are some things that are in your control and some that are not, and it's about understanding what's in your control and then saying, okay, what good planning can I implement so that I absolutely never run the risk of having to go back to work? And that is the premise of why I love doing what I do.
Speaker 1:Too often, in my opinion, people talk about this stuff and it's fairly surface level. Yeah, know what you want to spend in retirement? Okay, I feel like I have a good sense. It's going to change a little bit. Yeah, maybe there's a mortgage, say there won't be in the future. Travel, health insurance Okay, but once you do that, you factor it in, you put on a spreadsheet. I'll say, hey, why aren't you confident now retiring early? And they're like well, I do feel a little better because I've got a good sense, but I honestly already I can't put a name on it.
Speaker 1:This is what people say. I'm just telling you it's really hard to go back to work unless there are very clear measures that are telling me, I will be okay and I go. If you're looking for that magic wand, it doesn't exist Now. There is good planning that will make it so you never have to go back to work. But here's what I mean by that.
Speaker 1:Let's take an assumption that you want to spend $40,000 a year in retirement. Most of you are like whoa, whoa, whoa. That's like nowhere near enough. I'm like I know. But just let's keep it simple. Okay, $40,000 a year. You have a million dollars and there's no other income sources. There's no social security, no pension, no rental income. You have a million bucks.
Speaker 1:Okay, 4% is $40,000. So if you just went and lived off $40,000 every single year and markets never went up and down, you could retire with confidence and that'll last you 30 years. And I'll pause and I'll tell a client that. And they go. That doesn't sound good. I go. You're right, it doesn't sound good. Why doesn't it sound good? They go because I'm going to live more than 30 years. I'm retiring early, in my late 50s or early 60s. I go, that's true. So that 4% rule doesn't apply. I'll go.
Speaker 1:In fact, if you invest well and markets never went up or never went down and you apply really good withdrawal rates and you pull in from the right accounts. You're doing all the right strategies. You can have up to a 5% withdrawal rate and they're like wow. So that's like 50,000 a year instead of 40,000 a year. I go, that's right, they go. So if I had like 2 million instead of having 100,000, instead of having $80,000, I could have $100,000. I go that's exactly right, they go. Well, that sounds great. I go. Here's the problem. It's not as if markets aren't going to fluctuate in retirement. They go yeah. So what's your point? I go. My point is very simple when markets are doing well, I want you to give yourself a bonus.
Speaker 1:When markets are doing well, I'm telling my clients this is the year to take an extra trip. This is the year to go. Absolutely make sure, I'm going to help fund my kid's wedding. In other years, though, I'm telling the opposite. It's not as if my clients are spending 6,000 a month, and then I say I need you to now spend three. It's right. Now you're spending 6,000 a month. I know you said earlier on in the year you're debating a trip or funding your kid's wedding. This is not the year to do it, and you might say too bad, I'm going to do it anyway. I say great, you are the boss, remember, you are the CEO. You just need to know the magnitude of that decision and you might go. Wow, ari, you know, I see what you're saying here how much is that going to save me in the long run? And if you tell me it's a few thousand bucks, I'm going to go take that trip anyway because it's worth it to me. I say great, I want you to take the trip. But if I come back and say hey, for the next few months, because markets are down 10, 15, 20, 30%, if you're even willing to not take that extra trip and maybe cut expenses temporarily from instead of 6,000 a month to 5,500 a month that's a 20, 30 thousand dollar difference in the next few years You're going to go. Oh my God, I just didn't know the magnitude of that decision.
Speaker 1:So an early retirement is all about cash flow. It's about your withdrawal rate. Some clients come to me and their withdrawal rate's 10% and I say you're in an amazing position. You're like whoa. Well, 10%, ari, you just said a second ago 4% and then 5%. It sounds like kind of 5% is the highest. I go. It is forever Meaning 5% is a very sustainable withdrawal rate throughout time.
Speaker 1:And if markets are fluctuating which they will, and you're modifying with that and you're working with the markets, you can do really well. You can effectively take a lot out of your portfolio. It's called the Guyton's Guardrails approach. This guy, john Guyton, developed this idea of not closing your eyes and just taking income as you see fit, which there's nothing wrong with that. A lot of you could be fine if you did that. But my role is not to save the ship from sinking. You guys are not reaching out to me to save the ship from sinking. You are reaching out to me because you are trying to navigate the waters so that you have the smoothest experience ever.
Speaker 1:I pitch it like this to everyone. I say I want you to think about retirement, like going to Niagara Falls. Some of you are retiring in three months and you haven't planned well and the falls are coming. We've got a lot of planning to do, so we've got to work really hard in those three months because there's a big drop coming and that big drop that Niagara Falls drop it might be pretty because it is retirement and you won't be working anymore, but it can be a scary drop. We are gonna be right back in just a second talking about everything you need to know to retire early with total confidence. But I need you all to know that if your financial strategy looks great through good tax planning or withdrawals or investments everything I talk about in the show but your actual physical health will not allow you to live your dream retirement, then all that financial stuff goes out the window pretty quickly. So today's episode is brought to you by MyoDetox, which takes a holistic approach to your body in the same way I take a holistic approach to your finances.
Speaker 1:Myodetox is currently located in Canada as well as, primarily, in Los Angeles. They have three locations one, which is in Brentwood, which is where I go for all my soccer needs. Number two, they also have one in West Hollywood. And then, finally, number three, they have one in Studio City. So I am reading this for MyoDetox because I personally go to MyoDetox. I love them. They have transformed my body. I am sleeping better and I have clients that are telling me hey, some people listen to Rocky when they go to the gym, other people like myself. I am just trying to prepare for retirement. I wanna hike, I wanna spend time with grandbabies, I don't wanna be in pain, and that's why I'm recommending MyoDetox. Now, I do fully recognize that not all of you live in Los Angeles, so not all of you are able to work with MyoDetox, but I do invite you to start taking your health seriously through a holistic approach, and I find MyoDetox does a wonderful job of that. For physical therapy needs, I personally go there weekly. They keep me accountable so that I can do everything I wanna do. Once again, if you are looking for holistic guidance on your body, please do check out the link in the description of today's episode and you will see a link you can click on which will let you learn more about their services.
Speaker 1:Now let's get back to the show. Others of you, we've got a lot of room in front of us before the falls are gonna occur, so what we're doing is we're planning to effectively move you to see the Niagara Falls, almost so that there's no drop, and if we plan really well, you're gonna have a beautiful view to take a perfect picture of the Niagara Falls. And that's the difference is, I want you with total clarity before you retire, as opposed to coming up right to retirement and then hoping you put everything in order and that you have a smooth landing versus like a lazy river where you have a beautiful view of Niagara Falls the whole time and you really enjoy the retirement. So, with a withdrawal rate.
Speaker 1:Going back to my point, I told a client they're in a wonderful position to take 10% out of their portfolio and someone said how could that be possible? I go, well, what's happening with that client is they're retiring at 63. And what's gonna happen is they're gonna retire and they don't know exactly how long they're gonna live. But the truth is they're probably not gonna live past their early 80s. Very sad, but that's just the truth. Based on their health situation, they don't want to die with $10, $15 million and Social Security and RMDs are gonna kick this particular client in the butt in a few years. So RMDs stand for required minimum distributions and he has health insurance and travel costs and all these things moving around.
Speaker 1:And so what's gonna happen is he's like I'd love to take this one trip I've always dreamt of taking. When should I take it? And he said hey, all right, I looked at my withdrawal rate and if I wanna take this trip, I'm gonna be north of 8%. I go, I want you to do 10%. They're like oh my God, I thought that wasn't sustainable ever. I said, oh, it's sustainable right now, but in the next few years it means we're not taking this level of trips. And they were like I didn't need to take that level of trips anyway. I was just kind of modeling out maybe some stuff.
Speaker 1:I go let's really talk about this. What do you wanna do? And they're like to be honest, I don't need five trips a year. I wanna take two amazing trips this year with my spouse, based on what we're going through, and then I'd love to take one or two trips the next few years. And if markets are doing well, I want you to tell me if I can take more. I say, great, I'll do that. I said, if markets don't do well, are you okay with hearing Maybe you'll take one trip instead of two trips? And they'll say, yeah, I'd be willing to hear that and just as long as you can quantify why you're recommending that, I'm good with it. I say great, then let's do that.
Speaker 1:So it's all about being dynamic in an early retirement, the way you're not gonna feel worry about going back to work. I don't have some magic answer I'm gonna tell you about If anyone does. I'm skeptical of that person. It's the same way. I don't know what markets are gonna do. But I'm gonna give you one more example my happiest clients right now that are working with me. They are spending $8,500 a month in retirement. They wanted to spend 7,000 a month and you're like how are they spending more? They retired in March of 2020. Do any of you guys know right now what happened in March of 2020? I bet you do. Covid happened and we had a strategy in place to implement Roth conversions.
Speaker 1:So when markets were down and they weren't doing well, what most people did is they said I'm either gonna get out of the market or I'm going to hold and be a good long-term investor, because I know that I need to absolutely protect the long-term value of my retirement portfolio. Nothing wrong if you did that, but if you were really strategic, you did a Roth conversion and this client and I we converted hundreds of thousands of dollars from their IRA to their Roth IRA and all the recovery happened tax-free. So when they came to me, there was about $1.2 to $1.3 million. Now they're looking at $1.6, $1.7 million and that's in large part, tax-free money, and so now they're spending more and their withdrawal rates even lower.
Speaker 1:So the premise of retirement planning is markets are doing well, I want you to add new dollars. Okay, it's easy to add new dollars when markets are doing well. And even when markets aren't doing well, a lot of you are like, hey, all right. To be honest, I'm scared to retire because right now, I don't lose sleep adding new dollars. Even when markets aren't doing well, I don't care, I know I'm putting new dollars, I'm adding my 401k and that gives me comfort today. Because in the future, there's gonna be a day where I'm not adding new dollars and now I'm only depleting and I don't wanna run out of money. So what do I do? I go, you're gonna add new dollars and they're like that doesn't sound possible, I'm not gonna be working. I go, you're gonna be doing strategic Roth conversions, assuming it makes sense for the client. And so the premise is very simple Most of you are scared to death to retire because you don't wanna run out of money. That's simple. Then the next step is you're like, hey, I'm really scared because I'm not gonna be adding new dollars. And when markets are going down, like I said I was, I had comfort because I was still adding new dollars Once you retire.
Speaker 1:Yes, you can absolutely be a good long-term investor, but you can also be strategic. This isn't market timing. I'm not trying to outguess the market. I don't believe in stock picking, none of that. When markets go down, you can do a Roth conversion so all the growth can happen tax-free. So, whether it be a good tax strategy or a good withdrawal strategy, whatever that strategy is, if you wanna never worry about going back to work, in my opinion you have to have a dynamic strategy and a plan that tells you what to execute and when and how should that change over your time?
Speaker 1:I don't believe in asking someone what's your age and risk tolerance. You might say I'm a five today, I'm a 10 tomorrow. I don't know what should my investments say? The premise is your investments need to replicate exactly what you need in retirement. You cannot have a cookie cutter approach. Last example for you.
Speaker 1:Last story is client came to me and they said hey, I don't know if I can retire early. My neighbor retired early, but I don't have as much as them. I said tell me about your income sources. They go yeah, I have a pension, I go. How much do you wanna spend in retirement? They go 5,000 a month, I go. How much is your pension? They go 4,000 a month, I go. Okay, so 1,000 a month has to come from somewhere. Do I have that right? They go, that's right, I go. Your portfolio can be a whole lot more aggressive than your neighbor. I don't even know what their neighbor's portfolio is. They're like how do you know? I go. Because you don't need that portfolio to create 5,000 a month of income. You need to create 1,000 a month of income, and maybe only for a short period of time before social security begins or before inheritance is coming.
Speaker 1:So the premise in retirement is you can't be cookie cutter. You have to have a dynamic strategy. And so if someone came to me, just like that client just there, and they wanna spend 5,000 a month in retirement and they did not have a pension that covered 4,000 a month, their portfolio has to be a whole lot more conservative. They need more in conservative assets, what I call a war chest, to be able to ride out those waves of market fluctuations, because they're relying in large part or all to come from their portfolio so they can live. If you have $4,000 that are covered from your pension and the other 1,000 has to come from your portfolio. It can be invested a whole lot more aggressively to grow for you over time, which will then, of course, create more income.
Speaker 1:So the premise here is, once again don't do a 60, 40 portfolio or a 70, 30 or an 80, 20. It has to be customized on how much income you need in retirement. What experience are you looking for? That's what it comes down to. So hopefully you can gather from today there's no magic pill that you're gonna swallow and make sure that you're never gonna worry about running out of money. You're a human and you are gonna worry about it. The premise is it's now time to work with markets, work with tax strategy, work with good withdrawal plans, as opposed to saying I know I should be doing that stuff, but I don't know when, I don't know how, I don't know exactly how to really consider even beginning this. Oh my God, so much information already. You overwhelm me. You confuse me more. I never wanna confuse you more.
Speaker 1:My goal is to make all these episodes that you take action by either reaching out to a financial planner and saying, yep, this is what I'm looking for, or by going oh my gosh, I've got a really good sense, I'm in a good strategy, I have a good plan. I think I know how to do this. I'm good and maybe you are listening. Once again, I took one nugget from here. Maybe that one nugget from this episode is yep, I now totally understand that I shouldn't have a cookie cutter portfolio, that it shouldn't just be this one mutual fund or this one ETF or whatever it is. Maybe you took away that. Oh my God, markets go down. Maybe I don't just sit on my hands, maybe I do a Roth conversion, maybe I think a little bit more about this stuff.
Speaker 1:So my goal is to make it so that you have a confident early retirement, none of that head trash. So hopefully this was a helpful episode. Once again, this is what we love to do. We specialize in an early retirement and we specialize in tax planning, estate planning, investment management. It's the full scope of services. It's the only way we can do effective planning. Hopefully this was helpful, if this was even remotely helpful.
Speaker 1:I'm fully aware that I will not get to work with all of you. I kindly ask that you do leave a review on the show if it was helpful. Helps when people find the show. Thank you all so much. 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.