How do you know if you’re really on track to retire, especially if you’re hoping to get out early? Fred and Wilma in Denver are 33 and 31, earning a small fortune, but sitting on nearly two million dollars in debt. Should they focus on paying it down faster or saving more? Jeremy, in Summerville, South Carolina, is 42 with a hefty military pension. Is that his green light to go all-in on stocks for the next 20 years? And finally, Saver and Spender in Saratoga Springs, New York are 41 and 42 and hoping an early exit. Can part-time work can carry them through their gap years?
How do you bridge the income gap when you retire before Social Security or a pension starts?
Bridging the gap means covering your living expenses in the years between when you stop working and when guaranteed income like Social Security, a pension, or deferred compensation begins. You fund those years by drawing from savings, part-time work, or a mix of both. Done carefully, a bridge plan can let you retire earlier without draining your portfolio too fast.
Frequently Asked Questions
Does having a pension let you invest more aggressively in retirement?
A steady pension covers fixed expenses, so some investors treat it like the bond portion of their portfolio and hold more stocks with the rest. This is sometimes called a bond floor. Whether that approach is right for you depends on your other income, your spending, and how much risk you can stomach.
Should someone with a pension save more into Roth accounts?
A pension is usually fully taxable income in retirement, so piling taxable withdrawals on top of it can push you into a higher bracket. Roth accounts come out tax-free, which can offset that. How much to favor Roth depends on your current tax bracket and the income you expect later.
Is it better to pay off debt or keep investing when you earn a high income?
It comes down to weighing your debt’s interest rate against what your investments might earn, plus how much risk that debt puts on your household. High-rate or business debt tied to your income often takes priority, while lower-rate debt can sit while you invest. The right balance depends on your full financial picture.
What’s a reasonable withdrawal rate for early retirement?
A withdrawal rate is the percentage of your portfolio you take out each year to live on. Many planners use something around 3% to 4% as a starting point, since a lower rate leaves more cushion for a long retirement. Pulling much more than that in the early years can raise the risk of running short later.
Show Notes
- 00:00 – Intro: This Week on the YMYW Podcast
- 01:01 – $1.8M in Debt at 33: Pay It Down or Keep Investing? (Fred & Wilma, Denver, CO)
- 17:07 – My $97K Military Pension: Can I Go 100% Stocks for 20 Years? (Jeremy, Summerville, SC)
- 26:49 – Can We Bridge Ages 56 to 62 With Part-Time Work? (Saver & Spender, Saratoga Springs, NY)
- 40:01 – Outro: Next Week on the YMYW Podcast
- 41:03 – The Derails: The Flintstones, Project Hail Mary
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$1M Retirement Savings: Is It Enough to Retire? – YMYW TV
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Transcription
(NOTE: Transcriptions are an approximation and may not be entirely correct)
Intro: This Week on the YMYW Podcast
Andi: How do you know if you’re really on track to retire, especially if you’re hoping to get out early? Fred and Wilma in Denver are 33 and 31, earning a small fortune, but sitting on nearly two million dollars in debt. Should they focus on paying it down faster or saving more? Jeremy, in Summerville, South Carolina, is 42 with a hefty military pension. Is that his green light to go all-in on stocks for the next 20 years? And finally, Saver and Spender in Saratoga Springs, New York are 41 and 42 and hoping an early exit. Can part-time work can carry them through their gap years? Joe and Big Al spitball for all of them, today on Your Money, Your Wealth® podcast number 601. If you’re listening in Apple Podcasts right now, do us a favor and leave your honest rating and a review. If you’re listening on Amazon, Audible, Castbox, Goodpods, Pandora, PlayerFM, Pocket Casts, Podcast Addict, or Podchaser, you can rate us there too! It helps us a lot when you do. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP®, and Big Al Clopine, CPA.
$1.8M in Debt at 33: Pay It Down or Keep Investing? (Fred & Wilma, Denver, CO)
Joe: “Hi, Joe, Big Al. Long time listener, first time questioner. my wife and I love your show and have a general question about how we should prioritize our finances. Here are the details.” Fred, 33 years old. Favorite drink, Bloody Mary. He drives a 2021 F-150. It’s paid off. Self-employed business owner. Income fluctuates between 3 to 5, $400,000 to $500,000 a year.
Al: Wow, at 33. That’s amazing.
Joe: Wil- Wilma, 31 years old. Favorite drink, espresso martini. Drives- Ooh … a 2021 Audi Q7.
Al: Damn.
Joe: Paid off. Homemaker. We have two kids, two in 12 weeks.
Al: Wow. Brand new.
Joe: Planning on at least one more in the future. Investment breakdown is Fred, $200,000 in his, 401(k) and $40,000 in a Roth. Wilma, $40,000 in a Roth.
Joint $80,000 cash savings money market account, $100,000 in a joint brokerage account invested in individual stocks, ETFs, and then $40,000 in an HSA. $700,000 on the mortgage, 30-year. Let’s see. Value home is worth a million. 1.1 million on business loan, 10-year, started June, 2025. Value of the business interest is roughly two and a half million.
We max out our 401(k) HSAs annually and save another $25,000 roughly into a joint brokerage account. We overpay about $700 a month on our primary mortgage and overpay about $1,000 a month on the business loan “Current strategy is to have mortgage paid off in roughly 20 years from today and business loan paid off in eight.”
Al: Okay.
Joe: All right. “We ain’t sure if this is a good balance of savings, paying down liabilities, or we should focus more on saving or more on paying down debt.”
We hope to retire in our early 50s and would love to hear your spitball.”
Al: Okay. I had to s- make some assumptions on this one, Joe, because we’re missing one important fact here.
We don’t know what they spend.
Yep. So-
Joe: we can kinda figure. We can- I- … rack it in …
Al: I did. That’s what I did.
Joe: All right.
Al: So I started with 450, in between $400,000 to 500.
Joe: Fair.
Al: There’s a lot they’re saving. So l- I got 9,000 to HSA, 49,000 to 401(k) . Federal and state taxes, I said 45. FICA, I said 14. Their mortgage is about 50.
business is about 150 a year. Th- that’s a expensive, you know, loan ’cause it’s 10 year. And then their extra payments are about 20,000, so if those are all right, I get 113,000 of spend. I also, then inflate their assets, based upon starting at 460,000, 6%, 22 years, adding 84,000 a year. I get 5.3 million.
And if they’re spending 113 today, the future dollars, that’ll be 217. That’s about a 4% distribution rate at age 55. That’s kinda right on the cusp.
Joe: I have no idea what you’re doing there. What, Well- Let me ask you. What-
You just rattled off a bunch of numbers
Al: That’s ’cause you weren’t listening.
Joe: No, I was listening, but I was trying to be the listener.
Al: Okay. So what-
Joe: I could look at this, and then I’m like, okay, let’s say I’m walking my dog. Could I follow the numbers?
Al: if you’re not interrupted by a traffic light or-
Joe: It, was hard.
Al: It, I- it is. So- But- Though what-
Joe: All right, so the business, is he… So he’s totally self-employed, sole proprietor, and we’re assuming that-
Al: Yeah …
Joe: the business is coming out of, or the, the 4 to $500,000 a year is just straight profit, or is this after expenses? Where do we put this business loan? Is that-
Al: Yeah,
Joe: it- Is that $400,000 net?
Al: I-
Joe: Or, or- It would have- Does the business pay the loan, and then he’s netting 4 or $500,000?
Al: good question. I assumed it was net from the business-
Joe: Okay …
Al: and then he paid the debt on top of that.
Joe: Got it.
Al: So I don’t know. Hard, hard to say. That I-
Joe: So you’re saying that 113,000 is what their living expenses are?
Al: If all of those assumptions are right. So- That, so to, to back up one second, I just took his current income and I subtracted out everything I thought he was- Okay,
Joe: so what’s his… what, So he, we’re assuming he makes $450,000.
Al: Yep.
Joe: That is gross.
Al: That’s, no, that’s net from the business, I think
Joe: Net from the business.
Then he is saving $50,000 a year?
Al: yeah, 50,000 in 401(k)
Joe: And then he is-
Al: Call, call it 10,000 in a HSA.
Joe: Okay. It’s, and then-
Al: His, taxes between federal, state, and FICA will be about 60.
Joe: Okay, so he’s saving 60, taxes go to 60.
Al: Yeah,
Joe: and- Then he’s got debt payments of…
Al: Debt payments of 200, and that’s on the home of about 50 per year, and the business of about 150 per year.
Joe: Okay, and what-
Al: And, then he says he’s making extra payments, which if you do the math, it’s about another 20 grand.
Joe: Okay, got it. So- So just the debt service alone-
to pay off the business loan, his mortgage, and the added mortgage payments-
Al: Yeah …
Joe: you’re looking at $220,000 a year- Yeah … coming off of the 450.
Al: If my assumptions are right. Got it. Correct, So if my assumptions are right, or they’re close, he’s spending-
Joe: What’s left over is 115 … le- l-
Al: yeah, call it 115.
Joe: Okay.
Al: Yeah.
Joe: All right. Then you said, all right, 115,000 is the assumption of what they’re saving today, but they got another toddler on the way.
Al: Yeah.
Joe: Don’t they want another kid?
Al: Yeah, I know, and it’s gonna be expensive upfront with daycare.
Joe: Yep.
Al: no, not necessarily, ’cause she’s a homemaker. Woman’s a homemaker.
Joe: 2 to 12, all right.
Al: So-
Joe: So they’re spending 115,000. Where do they live? Denver, Colorado.
Al: Yeah.
Joe: I bet you that debt service of the business is, it’s gotta be paid by the business, but maybe not.
Al: maybe.
Joe: $115,000, and then they wanna retire at…
Al: they said 50s.
Joe: Okay, 50s.
Al: But I just picked- When you run the 55 … I picked the, they p- picked 55. 22 years from now.
Joe: Okay. So they’re 33, 31, so we got- 20 years, 115 at 3.5% inflation
Al: yeah, So, So I, got their assets in 22 years to be about 5 million, 5.3, and I got their spend to be about, call it 220.
Joe: Okay.
Al: So that’s about a 4.1, 4.2% distribution rate.
Joe: And a lot of stuff can happen in 20 years.
Al: yeah, and I made a lot of assumptions to get there, so I’m, not, I’m only about 30% confident of my answer.
Joe: Yeah. I- so the question is, this a good balance? They got $450,000 of cashflow. They need to figure out, okay, where should they put the resource?
Right now they’re putting $220,000 a year at debt service, and they’re saving 60,000. So is that the right balance? Yeah. 60,000 into 450 is 450… So they’re saving 13%. I would much rather see a savings rate of 20%.
Al: I would too, but, it sounds like the fixed payments are, like, 200 on the loans. You know, the business loan is 1.1 million, and that’s 10 year only at almost 7% interest rate, so that’s why that’s a lot.
that’s a, that’s almost 12,000 a month. So, yeah, so maybe they could stop the extra payments.
Joe: Yeah, I would take the extra payments and probably put it towards m- my overall savings.
Al: yeah, I think that’s a decent idea.
Andi: He’s self-employed. Can he open a solo 401(k) or something?
Joe: Yes. I think he does have one.
Andi: Oh, okay.
Joe: Yeah.
Al: Yeah.
Joe: Because that’s where all the savings are going. He’s got a, his current 401(k) is $200,000, plus, $40,000 in the Roth. But-
Al: Yeah. Oh, he say- Oh, I, missed this, $25,000 roughly going into our joint brokerage account.
Joe: $25,000? That’s an additional $25,000 a year-
Al: Yeah … of savings … so maybe, the spend’s more like 100.
Joe: Okay. So now he’s closer to 60, 70. He’s at 85. Yeah. So he’s clo- Yeah … they’re, close to 25% or 20%.
Al: Yeah, and now I think the math works if, the spend’s 100.
Joe: Yep. So save 20% of your income, it’s a, a good base to- Sure … to live off of.
Al: Sure, sure.
Joe: and then from a debt perspective, I think, yeah, that’s just, that’s just a lot, that’s a lot of debt service.
Al: It, is, and,
Joe: And I can see why they would wanna get that off their back.
Al: Well-
Joe: The $1.1 million business loan-
Al: that’s the main one … that, yeah, right- That’s, yeah
Joe: … because it’s a 10-year.
Al: The, home, yeah, you don’t necessarily have to have that fully paid off at retirement.
Joe: Are they, are they gonna sell the business at some point?
‘Cause he’s, he has a million and a half equity.
Al: Maybe, yeah.
Joe: So-
Al: And I didn’t factor any of that …
Joe: so if he wants to sell the business at retirement too-
Al: Yeah, presumably it’s saleable ’cause he bought it from somebody and continued it …
Joe: yeah, because he’s got the loan.
So you got another two and a half.
That’s gonna be paid off in 10 years, let’s say, at 43. That’s two and a half. I don’t know what the growth rate or the-
is gonna be on the business.
Al: Yeah, when you throw in the business, then there’s plenty of cushion if he can sell it. It-
Joe: So, then do you rearrange the savings, and you pay down more debt to get that off your back?
Because th- they’re, gonna have plenty of assets if he can sell the business that they-
Al: If he can sell the business, yeah Maybe.
Joe: Yeah.
Al: Maybe. I mean, i- if he wants to retire, let’s say, in 20 years, maybe if you get the home paid off in 20 years, then you’re feeling really flush at that point, if you sell the business too.
Or maybe you keep the business, Joe, hire a general manager, and you still get a nice salary.
Joe: Yeah, your 400,000 continues to come as cashflow.
Al: Maybe it’s 300 or-
Joe: 250, who cares?
Al: 250, but it’s good.
Joe: Yeah, that still looks good.
Al: You just have slight oversight.
Joe: I wonder what kind of business it is.
Al: I don’t know. It’s a good one, though.
Joe: He’s got a Ford F-150, so I bet he’s a badass.
Al: I think so. I think that’s a requirement in Denver, isn’t it?
Joe: It could be. It could be. But he drinks Bloody Marys. Does he? Drink Bloody Marys all the time or just, like, in, in the morning?
Al: that, that’s the only thing that doesn’t compute here.
Joe: He- so he gets home from a hard day at work, he’s gonna pour himself a Bloody Mary?
Al: That doesn’t sound right.
Joe: That doesn’t sound right at all. Nah. Maybe, like, on a Sunday morning- Yeah … or brunch- Yeah … you have a Bloody Mary.
Al: Yeah, or during, yeah, football season.
Joe: Sure.
Al: Yeah.
Joe: Watch the whole game.
Al: Yep.
Joe: But I don’t know if I’ve ever had a Bloody Mary after- … like, 12:00 noon.
Al: I don’t even like Bloody Marys.
Joe: I don’t think, I’m not a big fan. I can’t tell you the last time I had a Bloody Mary. I don’t mind tomato juice.
Al: then there you go.
Joe: But I-
Al: Do you like V8?
Joe: No.
Al: Me neither.
Joe: No.
Al: And, you know, it, sounds healthy until you look at the ingredients, and it’s, got, like- Sodium … 200 milligrams of sodium.
Joe: Yeah. a little something.
Al: Yep.
Joe: yeah, this is kind of a fun puzzle. I think the, there’s the numbers, and then there’s real life.
It’s, all right, you have another kid coming. How much do you feel comfortable sitting in cash? How much do you feel as a safety net? How solid is the business? Is it reliable?
Do you think it’s gonna be there? Is it up and down? Is he a contractor where he has boom and bust?
Al: Yeah, good question.
Joe: Is, Or is it a trade business that he’s got, you know, jobs stacked up for the next 10 years? so the, being a small business owner has a lot of perk- way more perks than downsides, but when you’re, thinking about your finances and how all this plays together, having that debt service over your head as a, a, small business owner driving 100% of the cashflow to the family makes me a little nervous.
Okay. I would wanna be thinking about paying that off sooner than later because I have the equity in the business. But they do a really good job of saving. A lot of small business owners that we have worked with in the past, they don’t have a ton of liquid assets. All of their liquid assets is sitting in cash- and everything else is that they reinvest back into the business.
Al: Yeah, that’s more common, right?
Joe: Very, yeah, because they’re like, “Okay, this is my retirement nest egg. I’m gonna sell the business at some point.” Or junior’s gonna take it over, and I’m still gonna be on the payroll and-
Al: Yeah, right y-
Joe: I’ll, cashflow it there.
Al: Sure.
Joe: So for him to start a 401(k) , for you guys saving in a taxable account, by starting, you know, tax-free accounts, I really love that. At 33 and 31, you already have, what, $500,000 of liquid assets.
You know-
And a great income to boot.
In a h- yeah.
Al: So, yeah. And,
Joe: But everything is driven by the business.
If the business fails, he still has $1.1 million business loan that he potentially has to pay off, or you file bankruptcy and-
Al: That’s the- Th- the- … that’s the risk, right? So y- you’d like to get that paid off.
Joe: be- because you’re- … it’s a shorted loan and it’s draining a ton of cash flow.
Al: Because it’s not like a house that it’s still gonna be there.
A business can ebb and flow- Ri- … as we know. And if, hopefully-
Joe: You personal guarantee it.
Al: Yeah,
Joe: Now if your home is-
Al: You pr- … at risk … you probably did.
Joe: Yeah, probably had to.
Al: Yeah, to get it.
Joe: All right.
Al: Yep.
Joe: yeah, I would wanna play around with this a lot more. but just off the cuff, first time I’m seeing this, it’s-
Al: It seems okay.
Joe: Yeah. Yeah, th- it’s like, okay, here, I wanna continue to save into my li- you know, liquid assets. But I wanna have a strategy of how to pay off that business loan maybe a little bit sooner, looking at, what is the cash flow of the overall business? Maybe- you know, 4 to 500,000. Those are, that’s a pretty big swing.
If I hit $500,000 a year, maybe that added 100,000 goes to the business loan. If I make 400,000, maybe I don’t add more to the, business loan and I continue to save in my retirement accounts.
But I would wanna be disciplined in the overall strategy of what I’m thinking about, and then running the numbers to see, you know, how comfortable I am.
Al: You know, I think I like that, and I think, I think as far as paying down the business loan, let’s see how you do during the year and, throw that extra into it.
Joe: Yeah. You set yourself, and no one likes a budget, and especially if I’m self-employed. It’s the whole reason wh- why I’m probably self-employed, ’cause I- But-
don’t wanna be on a budget … n-
Al: you never wanna be on a budget.
Joe: I don’t wanna answer to anyone.
Al: Including myself.
Joe: Yeah, including myself. I wanna spend what I wanna spend, and I wanna drink my Bloody Marys- That’s right … you know, on a Friday night.
Al: Yep. I-
Joe: instead of like everyone else has them on Saturday mornings.
Al: Yeah.
Joe: So- Yeah. Okay. I know we could kinda hem and haw on this, but I think they’re doing a great job.
Andi: Whether you’re considering going all-in on stocks, like Jeremy coming up next, or just trying to figure out which asset classes go in which bucket, having an actual investing plan beats winging it every single time. Download our Ultimate Investing Guide for free and learn how to build a portfolio around your personal tolerance for risk, find out where different investments should live, so you can hold onto more after taxes. Learn how staying diversified – that is, having your eggs in multiple baskets – can protect your retirement income, and find out how to keep your emotions from torching your returns when the market gets ugly. Just click the link in the episode description to download the Ultimate Investing Guide. When you request it, do us a quick favor and choose ‘podcast’ in the how-did-you-hear dropdown. The guide is free, it’s actually useful, and it might spare you a few of the mistakes Joe and Big Al spitball about every single week.
My $97K Military Pension: Can I Go 100% Stocks for 20 Years? (Jeremy, Summerville, SC)
Joe: “Hey, Joe, Big Al, Andi. Long time listener here. I’m 42, transitioning from a military career to a, a remote civilian, one in South Carolina.” All right. Charleston maybe? Maybe. “To give you the required visuals, I drive a Ford F-150. My drink of choice is a Yuengling.”
Andi: Yuengling. It’s-
Joe: Yuengling. Yeah, that’s Aaron’s favorite beer,
Al: Yuengling. Ying- Yuengling.
Joe: I like South Carolina.
Al: I’ve never been.
Joe: I’m, I’m right there with you, brother. yeah. Kind of- I wanna- … driving that Ford F-150 with your Yuengling.
Al: I, wanna go.
Joe: And he’s got his cat, Bandit.
Andi: You better not be driving with your beer.
Is that legal in South Carolina? I’m not sure.
Al: You know-
Joe: Could be …
Al: it might be. Yeah.
Joe: If you’re sitting shotgun, maybe. Maybe. Maybe the c- maybe cat, Bandit’s driving.
Al: Yeah, maybe.
Joe: he’s keeping me company while I look at my spreadsheet.
Al: Oh, okay.
Joe: Oh, boy. Looking for a spit ball on my 280-year plan to age 62. He, got an extra eight in there.
I think he meant a 20-year plan. All right, 28-year plan. 20. 20. Two zero.
Al: Oh, the eight just kind of slipped in there.
Joe: He,
Al: there was a, it’s extra eight.
Joe: A little fat finger. He’s had- A little, fat- … too many Yuenglings.
Al: Correct.
Joe: All right. He’s got a military pension of $8000 a month. Thank you for your service.
Al: Yeah, amazing.
Joe: That’s after tax, starting immediately. Yeah. And I think you’re gonna be really good, dude.
Al: Yeah, me too.
Joe: I’ve got 125,000, $8000 a month pension at 42. How many years was he in the military at that, 25 years? 18, probably got in?
Al: Yeah, maybe.
Joe: 18. Yeah, 20,
Al: 20-plus years.
Joe: yeah, probably 20-plus. Wonder what he did. Any clue? Any guesses?
Al: I’m gonna say opposite
Joe: Opposite. yeah. let’s see. you have to- he went in right after r- high school.
Al: Yeah, true …
Joe: and then got a- I guess- … degree while you’re working.
Al: yeah …
Joe: then you can move- Then you- … up the ranks there
Al: … yeah, That’s, that’d be my guess.
Joe: Okay. “My new civilian gig will allow me to save, $1000 a month, which I plan to bump up $2000 annually. Here’s the strategy. Because that pension covers my needs, I wanna be aggressive with my wants.
I’ve landed on a two-ticker global factor portfolio for the next 20 years.” A little two-ticker.
Al: Two-ticker, yep.
Joe: Oh, boy. You got, 70% in the Vanguard Total World and 30% in Abundis US small cap value.
Al: Okay, cool.
Joe: “Once I hit my go-go years at, 62, I plan to glide into a 70/15/10/5 split. Two questions. Joe, am I being a cowboy-
by staying 100% equities for the next 20 years, or does the $8100 a month pension essentially act as my bond floor, giving the green light to run this portfolio at full throttle?” Oh, come on, Jeremy, go full throttle, brother. Dude, just t- get that o- Ford F150 cooking.
Al: I’m, with you on that.
Joe: Yep. He got $100,000 pension.
Al: Yeah, So, I’m, guessing that his current salary covers his expenses-
Joe: Yeah, his needs
Al: … so you can save the pension as well, so this is gonna be a big number maybe.
Joe: It could be. So yeah, I’d like, I like your portfolio. Yeah, all world, a little Avantis small cap value, just a little, give you a little, little extra juice there.
I might even put more in… no 30, put 70/30? Yeah, I like that mix. I’m good. Yeah. I’m all good with you, Jeremy.
Al: I, think I might add 10%,
Joe: Emerging markets?
Al: … emerging markets, yeah. Yeah, you knew what I was gonna say-
Figure-
Joe: … before I-
Al: … out … before I even came up with the words.
Joe: I know. “How should I look at my tax versification?
With a pension and a high civilian salary, am I a tax bomb in the making? Should I be leaning even harder into the Roth side of the house to protect that small cap growth?” Love the show. Thanks for making finance actually entertaining.
Al: So since he asked me-
Joe: Yep
Al: … yes, 100% in a Roth because you’ve already got the pension, which is gonna be fully taxable, so you want-
Joe: he might have a VA pension, too.
I know- I don’t know how much of that- Well- … is taxed and tax-free.
Al: that’s true. We don’t know the makeup of that. Nope. But I would say you definitely, at this age, favor, the Roth. so maybe it’s 100% in Roth or, you know, maybe it’s depending upon what the pension really looks like. VA, which is tax-free-
Joe: Some of
it tax-free
right?
Al: But yeah, definitely favor the Roth.
Joe: What does he make? He says he can save 12,000 or $15,000 a year.
Al: that’s from his salary, but I think he saves the pension.
Joe: No, he doesn’t.
Al: but he said his, but he said his pension covers his living expenses.
Joe: Yeah, so why can he only save $1000 a month?
Al: I, all I can figure is that’s what he can save from his salary, but it seems like he’s saving his pension, too.
Don’t you think?
Joe: No, I don’t.
Al: So you think he’s spending 200?
Joe: I think he’s spending a lot of money.
Al: Got it.
Joe: I think he’s spending a lot of money.
Al: Got it. Well-
Joe: He’s 42. He’s getting… Or I don’t know. It’s-
Al: U- usually, you know, when you’re in the military, you don’t spend that much. I know. You wouldn’t, like, get out and all of a sudden- You don’t make-
turn it on …
Joe: I mean, he’s like-
Al: I think he’s saving the pension.
Joe: I have a pension of 80 after tax starting immediately, so maybe he hasn’t even got the pension yet.
Al: So he’s not even-
Joe: So he doesn’t even-
Al: Not even thinking about it yet.
Joe: So with his current salary, with his civilian gig-
it, he’s already saying he can save $1100 a month.
And then $1100 a month, he’s thinking about, all right, going into the two-ticker global, or he landed on a two-ticker.
Al: Yeah,
Joe: So he wants to be aggressive with his wants.
Just doesn’t add up, Jeremy.
Al: I, think it does. I think, he says that, “Because that pension covers my needs.” So I’m guessing-
Joe: His needs in the future.
Al: Yeah, So, but doesn’t cover his wants, such as travel, bu- buying new vehicles, you know, whatever. Buying a better house, whatever it may be. So he wants to be aggressive on that, ’cause he feels like, “I kinda already have the bond part of my portfolio from the pension.”
Joe: Okay.
Al: “And that can cover my needs.”
Joe: But if he’s saving $150,000 a year, I might have a different strategy for him from an investment perspective.
Al: That’s true. and I… Actually, let me take that back now I think about this. He’s definitely spending more than the $97,000 pension, because that only covers his needs, not his wants. He’s… It doesn’t cover anything else, right?
So he’s probably spending, I don’t know, we have no idea, $150,000, $125,000.
Joe: I don’t know what his, I don’t know what his gig is.
Al: Yeah.
Joe: What is it? If his pension is $100,000 a year from the military, his civilian job is at least paying him $100,000, don’t you think?
Al: Yeah, I agree.
Joe: so he’s got $200,000 of income coming in, and he’s saving $13,000.
Al: but my, the way I read it is that’s what he’s saving from the salary. It doesn’t talk about saving or not saving the pension. I’m gonna say he’s saving a bunch of it.
Joe: But if he’s saving a bunch of it, then my, Yes, then he’s being a cowboy, because you probably wanna be more diversified than just having two funds- because you’re gonna have a lot of money sitting in a brokerage account because- you have after-tax dollars from the pension. But I think he’s only saving $1100 a month. If you’re only saving $1100 a month, and I say only just not saying that’s a bad number, but given Jeremy’s situation here- then I’d like the two factor, the two ticker. But if he’s saving more than that, or I think he just needs to figure out where the money is going. He lives in South Carolina.
Al: Yeah.
Joe: the cost of living is getting a little high there. It is. A lot of people are moving there.
But, yeah, more investigation is needed.
Al: Here’s another one where it’d be nice to know what these people are spending.
Joe: Yes. People don’t like to share that because we judge. We’ll judge them.
Al: I suppose. Oh, the next one we’ve got the spend. How about that?
Andi: Coming up, Saver and Spender are trying to bridge the gap to an early retirement, which raises the question every one of us eventually asks: will the money actually last? Can you retire on what you’ve got now? Find out from Joe and Big Al how your lifestyle and spending, your longevity and health care, inflation and taxes, and where you retire all impact the kind of life you’ll live in retirement. They’ll teach you the financial moves that can help you build real wealth, and income strategies so your portfolio is built to last. And if you want to run your own numbers, check out the Financial Blueprint. It’s a free, self-guided tool that analyzes your situation through a few different retirement scenarios, and hands you a personalized probability-of-success report, so you can see how likely your plan is to hold up before you bet your future on it. You’ll find the Financial Blueprint link in the episode description. Watch the show, run your Blueprint, and stop guessing about whether you’re on track.
Can We Bridge Ages 56 to 62 With Part-Time Work? (Saver & Spender, Saratoga Springs, NY)
Joe: We got Saratoga Springs, New York.
Al: Okay.
Joe: We got Saver and Spender.
Al: Ooh.
Joe: Oh, boy. Highest rate of divorce, Al’s finances
Al: A saver and spender
Joe: When you get a saver and a spender, that just- … creates, creates conflict.
Al: Which one do you think is which?
Joe: I’m going… I don’t know. Let’s read on.
Al: Yeah, let’s see now. Yeah.
Joe: Let’s see. “Hi, Andi, Joe, and Al. My wife and I, 41 and 42, are looking for a little spitball for our overall situation.”
I’m gonna guess that she is the saver and he is the spender.
Al: Okay. I like that.
Joe: “I’ve been listening for about a year now, and I really enjoy learning through other scenarios. Thank you for doing all that you do. I think we’re on a decent pace, just want to make sure that the- what the future really holds.
My wife, let’s call her Spender-
Al: Ooh, Spender. 50/50
Joe: Wow. That’s, like, harsh words. “She drinks a cab in the winter and a rosé in the warmer months. I, saver, prefer a little Hendrick’s on the rocks in the summer.”
Andi: What’s Hendrick’s?
Joe: A little easy… That is gin.
Andi: Ah.
Joe: A very, good-
Al: Good gin …
Joe: yeah, it’s that’s, little highbrow.
Al: That’s, my, my friend Chip. That’s what he likes.
Joe: Oh, Chip.
Al: Yeah.
Joe: Hendrick’s on the rocks?
Al: And the saver does? e- a- yeah, on the rocks. Yeah.
Joe: Okay.
Andi: The saver is spending on Hendrick’s.
Joe: yeah. I, think that-
Al: That’s not, that’s not cheap
Joe: Yeah. That’s not
cheap.
You know, just a two buck Chuck cab. Yeah,
“Hendrick’s on the rocks in the summer.”
Okay. “A little hi- hazy IPA throughout the year. We have- Okay … two boys, six and eight, who keep us on our toes.”
Al: Okay.
Joe: “We have two major accounts, both split, a traditional and Roth.”
Al: Okay.
Joe: “401(k) traditional for match and bonuses is $126,000.” Okay. “401(k) Roth is $38,000. We have a rolled over traditional IRA of 173 and a rolled over Roth IRA of 138, for a grand total of $475,000 and $50,000 cash for her,” she’s a realtor-
with a 1099, as a 1099 employee. Tax payments, are paid throughout the year. Okay. “With matches and bonuses, we put away about $30,000, although 2025 was 45 because I had a bonus. If I- Okay … stayed with my current employer until the age of 56, I will receive $60,000 of annual deferred comp salary from 62 to 72.
My projection at 7% shows that we’ll be hovering around $2 million at that time, currently earning in the range of $220,000 combined, and we spend a healthy $90,000 a year, which includes kids and the mortgage. That is all projected to end at age 54.” How old are they? 42. 41 and 42.
Al: Yep.
Joe: All right, so we got a 15-year timeframe for the mortgage and the kids to be done.
They wanna spend $90,000 a year. They have $500,000 today. Yep. He’s doing some projections- Yep, with his $30,000 savings will be a couple million.
Al: Two million, which I agree with.
Joe: All right. Yep. so you- Yeah … you fact-checked.
Al: I fact-checked. I did the math, and I agree.
Joe: Okay.
Al: At, at 7%, I got two million.
Joe: “Do you think we can gap the bridge with some part-time work from 56 to 62 without causing too much damage to the overall bottom line?”
“We would really like to follow the boys out of NYS,” N- O- Saraston. New York-
Andi: New York State.
Joe: New York State, “when they go to college and relocate as a family to a low or no-tax state.”
Al: Ooh.
Andi: So the kids have to go to a low or no-tax state for college.
Joe: University of Florida. Let’s go Gators.
Al: There you go. That would work.
Joe: “How does the deferred comp plan impact taking Social Security if it’s still an option? Social Security estimate currently ranges, $3300 a month combined at 62 versus $5900 a month at 70. I try not to overload the info, but if you need anything else, please let me know. Thank you so much. Saver and Spender in Saratoga.”
Now, you know what? Saver and Spender gave us really good information.
Al: They did. There’s plenty to work with.
Joe: Plenty to work with. It’s not like a long- … drawn out-
Al: But we got the right stuff …
Joe: canoeing trip- … with, like, no real info.
Al: True.
Joe: Okay. All right, so here we go.
Al: Do you think she likes being called Spender?
Joe: No.
Al: Maybe she doesn’t listen to the show.
Joe: Maybe she- I guarantee she doesn’t. I don’t think so.
Al: Yeah, So I, here’s, what I think. I, think that I agree with the 2 million- Okay … in 14 years.
Joe: So at 54, so he’s looking to bridge from- 56 to 62. Why is he using 56 when he said 50… All right, so he’s gonna retire at 54.
He gets the deferred comp at 62, $60,000. He’s spending $90,000 now. He can bridge that 56 to 62, yeah. No, he’s using f-
Al: he’s using 56 because he’s 42 now. Yep. 14 years. Anyway, that’s-
Joe: Okay …
Al: that’s 2 million.
Joe: Okay.
Al: Adding 30 grand a year at 7%.
Joe: Yep.
Al: if you just look at the spending of 90,000 inflated at 3%, 14 years, it’s 136,000.
against 2 million, that’s a 6.8% distribution rate, but that’s before deferred comp. So I guess the way I sort of looked at it, Joe, is spend is 136, that, the portfolio, let’s just say a 3.5% distribution rate. That’d be 70 grand, so the shortfall is 66 grand. maybe you get a part-time job, make 60, 70. And then when your deferred comp kicks in at age 62, eight years later, or six years later, then deferred comp replaces that, and then eventually Social Security kicks in.
So I think that works.
Joe: 56 to 62, 800K. They’re gonna have 2 million here. 62, he’s gonna have $60,000 of deferred comp. This is-
Al: Yep.
Joe: Yep, yep … 62 through 72.
Al: Yep.
Joe: Okay, and then he’s gonna take Social Security when?
Al: I’m not sure he said, but that
Joe: w- let’s just say he’s gonna take it-
Al: Oh, here it, is.
Joe: So he gave us numbers, right?
Al: Yeah, fif- call it 6 grand at 70.
let- Which is, the 60 grand all over again.
Joe: Let’s just say he’s gonna take it at 62, just to make my math easier.
Al: Okay.
Joe: 40K here. So that’s $100,000. So from 56, you said it’s $136,000 of living expenses. That’s 62, right?
Al: Yeah.
Joe: I’m sorry, at 56? At
Al: 56, correct.
Joe: Okay. So let’s go- Yeah
136 present value. Let’s go, we’re gonna have six years at 3.5% inflation. Future value is 167. 167, so he’s gonna be short $67,000.
Andi: For the people who can’t see this because you’re just listening, Joe is actually running the numbers by hand on paper and with a pen and with his calculator. He’s being like-
Al: Yes
Andi: full on accountant mode here.
Al: So- Yeah … so
he’s, coming at this a different direction, so we’ll see if we get the same number.
Joe: Okay. So this is what I’m coming up with.
Al: What are you coming?
Joe: He’s gonna have $2 million at age 56. From age 56 to 62, he’s gonna deplete roughly $800,000 out of the portfolio if he wants to spend the $90,000 or your 136.
- Now, I’m not gonna get into, like, the deflation rate every single year. Yeah, no. I’m just kinda rounding. No, I- Are you good with me?
Al: Yeah, I’m good.
Joe: Okay. So at 56 to 62, he’s gonna deplete $800,000 from the $1.2 million. So then what I’m trying to solve for is how much money that he needs at age 62-
Al: Okay
Joe: to make sure that he can have a safe withdrawal rate from age 62 to the rest of his life.
So if I look at $136,000 of income at age 56, and if I inflate that or, the, living expenses to age 62- that’s $167,000
And so he’s gonna have fixed income at 62- of $60,000 of the deferred comp plan, plus another $40,000 of, his Social Security.
So he’s gonna have-
Al: If he takes it early, yeah …
Joe: if he takes it at 62.
So he’s got $100,000 fixed income. He’s gonna be short $67,000. 67 divided into a 4% withdrawal rate, he’ll need $1.7 million. He’s gonna pull 800 out of the two million. Assuming no growth on the two, he’s gonna be short about four or five hundred grand.
Per year, it’s probably 50, 60,000.
Al: Yeah. I got 66.
Joe: So-
Al: So-
Joe: Close, depending on which- Yeah … direction you wanna go.
Al: So if you got lost in what we said, what we’re saying is at 56 probably you need a part-time job. You got 50, 60. I got 66. I would round it up to 70 just to be safe. But $50,000 to $70,000 is probably how much part-time income you need to bridge that six-year gap before the deferred comp comes in.
And I wouldn’t necessarily… I, know you did it for ease of math, but I wouldn’t take Social Security at 62. I would delay that.
Joe: yeah. it’s just too big of a burn on the portfolio at that point. It, Well- … it all really depends on what the portfolio does-
Al: Yeah …
Joe: from age 56 to 62, to be honest with you.
Al: I also, here’s the other thing. 14 years from now, a lot can happen. So, so we’re just going on at- one, one scenario. He’s
Joe: got very young kids, and he could probably save a lot more, save a lot less, something happens. But here’s the, he… The, the biggest- Up or downturn of this overall strategy is his portfolio, what it does from age 56 to 62 if he did wanna retire at 56, ’cause he has no other fixed income, and if he doesn’t wanna go back to work.
yeah. And is he’s taking $140,000 out? Yeah. If the portfolio performs-
Al: Yeah
Joe: … I think he’d be fine. Sure. If it flat or if it goes down, then he’s in trouble.
Al: But he said he’s, Can he bridge the gap? he said, “Gap the bridge,” but can he bridge the gap?
Joe: I like gap the bridge.
Al: Can, gap the bridge with some part-time work between 56 and 62, and that’s exactly what I would do if he wanted to retire at 56.
Yep. I would-
Joe: And it’s not like a, a, stressful, long, you know, full-time job …
Al: No. I think he’d do it for six years. You make 60 grand, 70 grand, 50 grand, some- somewhere in that neighborhood- Yep … then your portfolio is preserved- It’s fine … and then, that’s replaced with the deferred comp, which then eventually is replaced with Social Security.
Yeah, I think it, looks fine.
Joe: Yeah. Yeah, you’re in great shape. He’s saving $30,000 a year, 40 years old. I mean, at 40 years old, I mean, he’s doing way more planning than the most. he’s, they’ve done a great job of, saving even though he’s calling his wife spender. My, wife’s a spender.
And
she’s proud of being a spender.
Al: Yeah, I wouldn’t have, I wouldn’t have said that on air, but, I don’t necessarily disagree.
Joe: No. It’s,
Al: and the second question, how does deferred comp impact taking Social Security? what’s cool about it, Joe, is then he can delay Social Security, ’cause he has the deferred comp, and then take it later, and then have a much higher amount.
Joe: deferred comp wouldn’t, is not earned income, is it? Depends. That, don’t, they check the box? Depends on how they check the box. It come, it could come as W-2.
Al: it depends. I mean, most, most deferred comp is, like, deferred salary, so it is income.
Joe: So it’d be W-2 income coming to you- Maybe off the 401(k) s
how it would be reported to the IRS.
Al: Yeah.
Joe: And so then he’d be subject to-
Al: Maybe, or maybe it’s, 1099. I’m not sure, ’cause that, it’s, plan-specific, too.
Joe: Yeah, so it, could jeopardize… If he took it at 62 and he has a $60,000 deferred comp, that would, you know, Social Security would look at that and take, you know, dollars away because-
Al: If it’s earned income
Joe: if it’s earned income. Yeah, So you would wanna double-check with the plan administrator to see if the deferred comp is earned income.
Al: But I think he’d wait anyway because you wanna replace the deferred comp when it goes away, which would be at 72. You claim Social Security at 70. Now you’ve got this income that replaces what deferred comp…
And the other thing too, Joe, is we don’t know if the 60 grand will be inflated. You know, we’re just assuming it’s a fixed number.
If it’s inflated, the, you know, cost of living, this looks a lot better.
Joe: Yeah. I haven’t seen a deferred comp payment pay for 10 years from 62 to 72. I wonder what kind of got put, like-
Al: I don’t know, ’cause usually it happens as soon as you retire, and it’s usually on a five-year or 10-year Five-year, but- And every single year it’s a
Joe: different-
Al: You can elect- Schedule
something different. Yep. Yep.
Joe: All right. but no, I like what, how he’s thinking. Yep. It’s all good.
Al: Me too.
Outro: Next Week on the YMYW Podcast
Andi: Next week on YMYW, more making fun of finance and more spitballs. In the meantime, we want to hear from you. If you had a pension covering your bills, would you go all-in on stocks like Jeremy, or would you play it safe? Head to YouTube and tell us in the comments. And if YMYW has helped you think differently about your own retirement, share it with a friend who needs to hear it too. Get a second opinion on whether your own plan holds up, from the experienced professionals at Pure Financial Advisors. Our free, no-cost assessment takes a comprehensive look at your whole financial picture, so you can see where you stand and where you might improve. Just click the free assessment link in the episode description, or call 888-994-6257 to schedule yours. Pure Financial Advisors is a registered investment advisor. This show does not intend to provide personalized investment advice through this podcast and does not represent that the securities or services discussed are suitable for any investor. As rules and regulations change, podcast content may become outdated. Investors are advised not to rely on any information contained in the podcast in the process of making a full and informed investment decision.
The Derails: The Flintstones, Project Hail Mary
Joe: Flintstones. Like the Flintstones?
Al: The Flintstones is right. Yep.
Joe: You like The Flintstones?
Al: Loved them. One of my favorite cartoons as a kid.
Joe: Really?
Al: Yep.
Joe: Big fan, Andi, The Flintstone?
Andi: I love the theme song. I mean-
Joe: Did you ever watch the-
Andi: it’s, that’s big band music. It’s great …
Joe: did you ever watch, like, the real movie that, with John Goodman?
Al: Yeah. It’s so long ago, I sort of forget what happened.
Joe: Isn’t there a couple different-
Al: It, was- … Flintstones? It was John Goodman
Andi: I didn’t see it.
Joe: John Goodman and who played Barney?
Al: I forget
Joe: Yeah, wasn’t it the guy Who Shrunk My Kids? Maybe I shrunk my-
Andi: Oh, Rick Moranis?
Joe: Yeah, Rick Moranis, I think, believe-
Al: Did he do Barney?
Joe: Yeah, he did Barney.
Al: Okay.
Andi: Yep.
Joe: But then there was-
Andi: It was Barney Rubble, yep. Wow. And Betty was Rosie O’Donnell, and Elizabeth Taylor was actually in it?
Joe: Yeah. She played, Betty’s mother
Al: So you are like this walking encyclopedia- No, but I’m- … of, movies.
Joe: It’s d- it’s awful. I’ve, seen this movie once in my life maybe, and it was probably- … 20 years ago.
Al: That’s so… Now, I re- I remember watching it, so that’s a plot.
Joe: 1994.
Al: I remember watching it, and I also remember John Goodman was, Fred.
That’s as far as I get.
Joe: That’s it? Okay.
Al: I have no plot. I wouldn’t have known any other characters.
it happens. But look at you.
Joe: Yeah. There you go.
Al: But I told you, my, my thing i- is not so much remembering the plot. I can’t remember if I saw the movie or not.
Joe: When’s the last movie you went to?
Al: Went to?
Yeah. The, Hail Mary project.
Joe: What is that?
Al: That’s, that, that’s the book that was written about this… Let’s see. How can I explain it? they called it astrophage. It was these little micro, micro, whatever, micro something.
Joe: Microbes. Okay.
Al: Micro something. Okay.
Joe: Got it.
Al: And they were basically, blocking the sunlight, and the Earth was gonna die.
Joe: Oh.
Al: And they had to send a spaceship out to this other, galaxy or other system, to try to find out how this other system didn’t have it, and we had it, and anyway, so they sent the spaceship. It’s actually a really good book.
Joe: Do you read the book?
Al: I did.
Joe: Did you listen to the book or did you read the book?
Al: I, listened to it.
Joe: L- on what, 10X?
Al: No.
Joe: It’s what-
Al: No, I’m not like that … friend. I, I-
Joe: So you got through that book in like…
Al: it, took a few weeks. I mean, it’s a big book.
Joe: I heard. I heard. Okay. All right.
Al: But I, i- it was highly enjoyable.
Joe: Now that you mention that it’s a book, the Homeland P- Project, what’s it called?
Al: The, Hail Mary Project.
Joe: Hail Mary Project.
Al: Okay. B- because it was like a last ditch effort to save the world.
Joe: Okay. Ryan Reynolds.
Al: Yeah, Ryan Reynolds was in the movie. Yep.
Joe: No. Really? I don’t think it’s Ryan R- Reynolds. I think it’s on Netflix now. I-
Al: Is it? Is it?
Joe: It’s not, it’s, Gosling or it’s-
Al: Oh, Ryan Gosling.
Yeah, you’re right. Ryan Gosling. Come on. It was a Ryan.
Joe: No. I don’t think it’s Reynolds.
Al: But it was-
Andi: Yeah, it’s Ryan Gosling. You’re correct.
Al: Yeah.
Andi: And
Al: you
Andi: didn’t see it. And it’s actually called Project Hail Mary. No.
Joe: Project Hail Mary. I saw there’s something on- … I, on, Netflix just recently, as you mentioned that.
Then I listened to… Have you listened to the podcast, what is it, Two Bears in a Cave?
Al: No.
Joe: So, one of the guys was talking about, he read, he tried to read the book and then watch the movie, but the book, it was like- 400 hours if you listen to it on audio. so it was a large book.
Al: Yeah, a large book.
Joe: Well- Project Runway. Okay. No, Project… What, what-
Al: The one-
Andi: The Hail Mary Project.
Joe: Okay, there you go.
Al: So remind me next time we’re in a trivia contest- … and, the c- and the topic is movies, I wanna be on your team.
Joe: Got it. All right. Just text me. yeah, I like movies.
Al: I know. I love it.
_______
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