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Joe Anderson, CFP® and Big Al Clopine, CPA spitball for three people planning for early retirement and wondering, can I really pull this off? How much risk can you take, and how much do you really need to? That’s today on Your Money, Your Wealth® podcast 588. Dr. Kickass Seabass and his wife are both 41 and they got a late start on savings. Can they still hit FIRE – that is, financial independence, retire early – by 55? Get your salt shakers ready. Aang and Katara have military pensions and a big thrift savings plan. Should they invest it aggressively or play it safe over the next decade? Finally, Steph has a mandatory retirement at 56 but wants out even sooner, at age 50… if his wife Ayesha doesn’t kill him first for quitting seven years before her.
Can you retire early at 55 (FIRE) if you have a high income but relatively modest savings?
Financial independence, retire early (FIRE) at 55 is possible with a high income and disciplined saving, but it depends on your target number, not just your salary. A common approach is to estimate annual retirement spending, adjust for inflation, and divide by a sustainable withdrawal rate to find the nest egg needed to bridge the years before Social Security.
Frequently Asked Questions
Q: How do I calculate the savings I need to retire early?
A: A common method is to estimate your annual retirement spending, adjust it upward for inflation over the years until you retire, then divide that figure by a sustainable withdrawal rate to get your target nest egg. For example, dividing inflated annual spending by a rate near 4% gives a rough savings goal. Retiring earlier raises that number, because the portfolio has to cover more years before Social Security and pensions begin.
Q: Does a pension count as part of my bond allocation?
A: Many planners treat guaranteed income like a pension as the fixed-income or “safe money” part of your overall financial picture. Because the pension reliably covers fixed expenses, you may be able to hold a higher percentage of stocks in your investment accounts than you otherwise would.
Q: How aggressive should my investments be 10 years before retirement?
A: There is no single standard allocation; it depends on how much you need from the portfolio for income. If your essential expenses are covered by pensions or other guaranteed income, you may be able to take on more risk. A common guideline is to hold several years of needed withdrawals in safer assets so you are not forced to sell stocks in a downturn.
Q: What is a safe withdrawal rate for someone retiring at 55?
A: A withdrawal rate that works at 65 may be too high at 55 because the money has to last longer. Rates above 5% can be aggressive for an early retiree, while a rate closer to 3.5% to 4% is often considered more sustainable, depending on your investments, spending, and market conditions.
Q: Should I move money to safe investments right before retirement?
A: Holding some safe assets near retirement can help protect against having to sell stocks after a market drop, which is known as sequence-of-returns risk. How much to shift depends on how much income you need from the portfolio versus what guaranteed sources like pensions and Social Security already cover.
11 rapid-fire spitballs today from Joe and Big Al on Your Money, Your Wealth® podcast number 587, on everything from Roth conversions and RMDs to whether a guy named Wayne can finally treat himself to a $75K Audi. Aaron in Syracuse just hit a million bucks in his 401(k) and realizes he needs a spitball on keeping his RMDs low. Do new Roth conversions restart the 5-year clock? 72-year-old Mike in Texas wants to know. Marion inherited a not-yet-five-year-old Roth, and an IRMAA problem along with it. Lu and Stephen each argue that the fellas’ conversion and retirement spitball math might be misleading. Teachers Tony and his wife have pensions that cover everything, so should they even keep saving? John and Peggy need a retirement spitball, Rajesh wonders if he should pay off his mortgage or convert to Roth, and Mike in San Marcos asks about funding a Roth with pension money.
Should You Do Roth Conversions Before RMDs Start?
If your tax bracket after required minimum distributions begin is likely to be higher than it is now, converting pre-tax savings to a Roth in advance may reduce the size of future RMDs and the taxes on them. Whether it makes sense also depends on your time horizon, your pre-tax balance, and other factors like your current income and available cash to pay the conversion tax. Converting during lower-income years before age 73 is often when the opportunity is largest.
Frequently Asked Questions
Q: Do new Roth conversions restart the 5-year rule if I’ve had a Roth for years?
A: For someone who is over 59½ and has held any Roth IRA for at least five years, withdrawals are already qualified, and a new conversion does not restart that clock for them. Separately, each conversion does carry its own five-year clock that applies mainly to avoiding the early-withdrawal penalty for those under 59½.
Q: Can you fund a Roth IRA with pension income?
A: A Roth IRA contribution requires earned income such as wages or self-employment income, and pension income does not count as earned income. If you have enough earned income to cover the contribution, the IRS does not track which specific dollars you deposit. For 2026, the contribution limit is $7,500, or $8,600 if you are 50 or older.
Q: Are the earnings on an inherited Roth IRA taxable?
A: If the original owner held the Roth IRA for at least five years, withdrawals including earnings are tax-free to the beneficiary. If it was held less than five years, the earnings can become taxable until that five-year period is met, and withdrawals follow the order of contributions first, then converted amounts, then earnings.
“Walter and Skyler” in Iowa ask if they’re on track to retire early, or if they’re just “cooking up overconfidence?” And how aggressively should they convert their retirement savings to tax-free Roth money before the pension and Social Security kick in? California Dreamin’ has it down to one decision: convert to the top of the 22 percent tax bracket, or push into the 24? “Mike and Carol” in Florida ask, when you’re weighing a conversion, should you be looking at your tax bracket, or your actual effective tax rate? Finally, is it worth the cost for “Westley and Buttercup” to use the brand new option to turn a big employer contribution into Roth money?
When Should You Do Roth Conversions?
Roth conversions may be appropriate in the low-income window after you retire, but before Social Security benefits, pensions, or required minimum distributions begin, when your taxable income falls into a lower tax bracket. For example, if you will be in the 32% tax bracket or higher later in retirement, converting to the top of the 22% or 24% bracket before fixed income begins can prevent much larger RMD-driven tax bills later.
Frequently Asked Questions
Q: When is the best time to do Roth conversions?
A: The window between retirement and the start of Social Security and required minimum distributions, because your taxable income is at its lowest. Converting then locks in lower tax rates before RMDs push your income into higher brackets at 73 or 75.
Q: Should I convert to the top of the 22% or 24% tax bracket?
A: Many retirees convert to the top of the 22% bracket and opportunistically reach into the 24% bracket during market downturns. A down market lets you convert more shares at a lower value, and the recovery happens tax-free inside the Roth.
Q: What’s the difference between my marginal tax bracket and my effective tax rate for conversions?
A: Roth conversions are taxed at your marginal rate, the rate on your last dollar of income. Your effective rate is your average across all income. The key question is what bracket your future RMDs will land in, since deferring now can mean a much higher marginal rate later.
Q: Should I move my pre-tax 401(k) contributions to Roth?
A: It depends on your current bracket and how much you’ve already saved tax-deferred. If you have little Roth and expect large future RMDs, shifting contributions to Roth or using a mega backdoor Roth builds tax-free balances. Some prefer the upfront deduction and convert later.
Q: Can I move bonus or RSU money directly into a 401(k) or mega backdoor Roth?
A: Not directly. You increase your paycheck contributions so more salary flows into the plan, then cover your living expenses by drawing from the cash you set aside from bonuses or vested RSUs. It routes that money into tax-advantaged accounts indirectly.
Today on Your Money, Your Wealth® podcast number 585, Joe and Big Al spitball for folks who are already winning and thinking about getting fancy with it. Reno in Oregon is 50, and his pension is so big he’s not sure how to invest or why he would need to convert to Roth. Michael is considering taking out a half-million-dollar margin loan to juice investment returns. What do the fellas think? Tune in for the surprising debate. Husker Fans just pocketed two million from selling their business, and here come the product pitches: should they buy annuities, set up a charitable trust, or just swallow the tax? What do the fellas think of whole life insurance? And finally, John and Lib on Waltons Mountain – or rather, the Catskills – aren’t sure if they’ve saved too little or too much. Can they bridge the gap until their pension?
Heidi from the Space Coast of Florida found a money-saving tidbit in a past episode that completely changed how she thinks about her financial advisor’s fee, and Joe and Big Al expand on the strategy. Laverne and Shirley have four million bucks, Roth conversion questions, annuity questions, and a retirement plan so detailed it may require a diagram. Finally, Bess and George from Pure Michigan are already retired, already on Social Security, and already losing sleep over their investments. So why are they so stressed? Joe and Big Al’s debate about a 1% advisory fee gets a little spicy in that one.
Joe Anderson, CFP® and Big Al Clopine, CPA spitball for people sitting on life-changing gains who are just one wrong move away from handing a third of it to the IRS. How should they diversify their concentrated stock positions? That’s today on Your Money, Your Wealth podcast number 583. First up, Walter’s a software engineer who got lucky 15 years ago. Now he’s got $1.6 million in company stock, and a retirement clock ticking down in six years. Richard from Staten Island listened to his son six years ago, went big on oil, saw a huge gain, and now 80% of his portfolio is in that one position. His custodian wants him to sell, but he’s not so sure. Finally, Doctors “Bones and Beverly” just discovered they’ll be inheriting millions still sitting in an old 401(k) loaded with company stock.
June in Washington State is 62 with $2.5 million saved and a $350,000 pension on the table. Should she take the lump sum or the monthly check for life? (Spoiler alert: there’s a 3-to-1 vote in the studio, and Big Al is the one.) Plus, how aggressive should “Homer and Marge” get with Roth conversions, and is it smart to pay the conversion tax from an inherited IRA RMD? Pompous Assets drops his big, fat wallet on the YMYW table next: with millions in tax-deferred and taxable accounts, why is his financial advisor fighting him on a Roth conversion? Of course, Joe and Big Al have some thoughts on the subject. Finally, Johnny Mercer in Georgia is eyeing an immediate income annuity and a MYGA. The fellas break down why that 7.5% “rate of return” might not be what he thinks.
This week Joe and Big Al are spitballing for some folks who’ve done the work, hit the numbers, but aren’t sure if they can really walk away yet. Martha in DC is 44 and says her soul is being sucked out of her body by her employer. When can she stop working full-time and foster puppies instead? “Bandit” is bullish on his company stock in archeology instruments, but not so much on his work itself. “Kevin” is staring down a wall of deferred comp and needs a spitball on how aggressive his and “Winnie’s” Roth conversion strategy should be before RMDs hit. Can both “Bandit and Chilli” and “Kevin and Winnie” call it quits this year?
Brian in New York and “Todd and Margo” in Utah each have over $3 million in their pre-tax accounts. What should their Roth conversion strategies look like, and can Todd retire this year? But first up, should “Captain Morgan” go Roth to avoid RMDs and can he retire in a couple of years? Should “Klo Jopine” contribute to Roth instead of traditional if his income will always remain the same? Finally, Kyle and Katie have high incomes and need a spitball on how they can avoid future RMDs. Ya think Roth conversions might be in their future? We’ll find out.
“Chase and Ryder” are 56 and 55 with $5 million saved and huge pensions the day they retire. So why are they so nervous about pulling the trigger? “Andy and April” are 46 with $2.4 million saved and 10 years until they want to retire. Can they get there, and do they need a trust? “Burt and Sally” are in their late forties with solid pensions and a retirement dream, but is the math close enough to make it work? Finally, does “Dolly” have any options for squeezing more out of Social Security when she and her spouse have identical benefits? She’s inheriting a brokerage account too, and wonders about the asset mix.
Joe Anderson, CFP® and Big Al Clopine, CPA spitball on whether a popular early retirement strategy could actually blow up your financial plan, today on Your Money, Your Wealth® podcast number 577. Red and Kitty from Wisconsin are burned out at 40 and wonder if retiring at 45 using the 72(t) tax election to take substantially equal periodic payments, or SEPP, is a smart bridge strategy. Jiminy Billy Bob in North Carolina is also considering a 72(t). How should he structure his withdrawal order, and does he need to shift into bonds before downshifting his career? Plus, Steve and Sharon in Minnesota have 8 million bucks. Steve is getting laid off at age 56. What should they do with their 401(k), stock options, incentives, and benefits before and after the layoff?
Are Roth conversions worth it? We’ll find out, today on Your Money, Your Wealth® podcast number 576. TJ in PA is gonna have huge capital gains. Joe and Big Al spitball on whether it’s worth it for him to convert. Rebels Without a Gauze in New England are over 70. Is it too late for them to convert? How much should Biking Barnsey convert from his tax-deferred accounts to Roth each year, and are there any single ladies in the YMYW audience that would like to help him spend his retirement money? Finally, the fellas spitball on whether Zisi and his wife are being too aggressive with their conversion strategy.
“Lloyd and Diane” in Montgomery County are 50 with $8.4 million. Can they retire early and still be generous with their kids? E and T in Missouri are 34 and 31 with $255K, and hopefully some big inheritances in the future. Can they fund the kids’ college, and help them buy their first homes, AND retire early? Kent in Kansas City is 73 with 12 million bucks and $2 million in life insurance. Do Joe and Big Al back up his plan to buy an annuity, gift money to his kids now, and still spend freely in retirement, Die With Zero style? Finally, should John in the San Francisco Bay Area sell the family home and move to Nevada, or hold the house for his autistic daughters to inherit later?
Joe and Big Al focus on Social Security claiming strategies as part of the retirement spitballs, today on Your Money, Your Wealth® podcast number 574. Bijou Plutus and her husband in Massachusetts are 62 and 64 with about a million dollars. Can she retire at 65, and should he claim Social Security early? Dr. Jekyll and Mrs. Hyde in the Twin Cities have about the same at 51 and 49, plus big pensions and high spending. Can they afford to retire early, and when should they claim Social Security? Diggler and Roller Girl in Tennessee are 57 and 58 with about $600K, and Diggler estimates his Social Security break-even is at age 77. Can he collect Social Security early and simply work recreationally?
“Carl and Jane” have eight million bucks and their advisor is suggesting a 130/30 long-short investing strategy. Joe Anderson, CFP® and Big Al Clopine, CPA, spitball on whether this is a smart tax move or unnecessary complexity — and whether they would do it themselves. Plus, Tyrone and Tova think they may never even need their retirement accounts, so do they really need to bother with Roth conversions if the kids are going to inherit the money anyway, or could skipping the conversions mean losing half their retirement income to taxes? Mark in San Diego is juggling Roth conversions and Social Security timing without blowing up his tax bill, or the income-related monthly adjustment amount for Medicare, or net investment income tax. And “Boat Drinks” has a big non-qualified deferred compensation plan. How can he structure payouts before it turns into a tax nightmare – and before he potentially gets laid off?
