Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:52 – Wife Wants to Retire at 47. What Are We Missing? (Michael, TX)
• 14:03 – $3M Saved, $640K Income: Can We Retire at 50? (Homer & Marge, Northern California)
• 21:19 – Pension + $1.45M: Can I Retire at 58 and Spend $11K a Month? (Seth, North Central IL)
• 26:51 – Can We Stop Saving Now at 42 and 45 and Still Retire at 55? (Shua, Phoenix, AZ)
• 36:07 – Outro: Next Week on the YMYW Podcast
• 37:19 – The Derails: Big Al Canoeing on the Russian River

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Transcription

(NOTE: Transcriptions are an approximation and may not be entirely correct)

Intro: This Week on the YMYW Podcast

Andi: Today on Your Money, Your Wealth® podcast 598, Joe and Big Al spitball for Shua in Phoenix, who has a million dollars saved at age 42. Can he stop saving right now, coast until age 55, and still spend $170,000 a year in retirement? But first, Michael in Texas is a stay-at-home dad who does the stock market. His wife wants out of her job at age 47. Will their $5 million last through retirement? And then Homer and Marge in North Carolina make 640K in sales and want to spend up to 25K a month, and Seth in Illinois wants to retire at 58 on a pension and a Roth. Some of these plans work and some of ‘em aren’t even close. Follow along, see what happens, and jump into the YouTube comments to share your thoughts. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP®, and Big Al Clopine, CPA.

Wife Wants to Retire at 47. What Are We Missing? (Michael, TX)

Joe: All right, let’s go to Texas. Okay. Let’s visit with Michael.

Al: Okay.

Joe: So his wife wants to retire at 47.

Al: Okay.

Joe: “Hello, can you please help me with a little spitball? Wife is sick of the stress of her job making $220,000 a year, and I’m a stay-at-home dad who does the stock market for extra income.” He does it.

Andi: He does the stock market.

Joe: He does that. Yeah,

Al: He does it good. Yeah, Yeah.

Joe: so he’s stay-at-home, stay-at-home dad that does the stock market.

Al: I think he’s proud of that. I think he’s had some wins.

Joe: Okay.

Al: Yeah.

Joe: “I’m 52. She would like to volunteer and help people at a nonprofit. I would like to continue doing that stock market.”

“Also, we have twin boys. we have twin boy and girl who are age 12 in sixth grade. We have about $5.3 million portfolio, including a paid-off house.” Wow, look at you two-

Al: I know, right? … doing the stock market.

Joe: Okay, here’s the breakdown. We got a little high-yield savings account of $250,000 for mar- market downturns.

Total brokerage account is 2.2 million. 401(k)s is 1.7 million. Roths, 425. Paid-off house and condo, 740,000. Also in the brokerage account, we make $80,000 in dividends. Our living expenses are 120,000, but we foresee in the future it increasing to about 150 with healthcare and extra costs for the kids. The plan is to live on the 3 or 4% rule off the brokerage and dividends until the kids graduate high school in 7 years.

We can also do a 72(t)out of the 401(k) to supplement income. At the same time, we wanna do Roth conversions when we don’t have much of an income.” All right. “Then we plan to sell the condo and the house- “… for $740,000, help the kids with college, and the kids should be taking out loans for half the college cost.

Also, put the rest in our brokerage account. At the same time, my solo 401(k) will be available with $325,000 in it at age 60. When the kids are in college, we plan to travel full time. When the kids are graduated, the goal is to come back to the United States and live in a low-cost city for retirement. My wife’s 401(k) should be available.

The value of the 401(k) would be $3.4 million at age 60.” I like how he’s doing these calculations. What… Okay, “Social Security for me will be $1400 a month at 62. My wife would be $5200 a month at age 70. Does this sound like a good plan? Is there anything that I’m missing? I drive a 2018 QX80 and my wife drives a 2024 Tesla Y.

I like t- the occasional rum and Coke, and the wife liked anything fruity with alcohol. Thank you. Love your show.”

Al: All right.

Joe: Wow. Okay. Oh, he-

Al: So let me, let me-

Joe: He’s got- …

Al: maybe summarize here. He got, he’s got in liquid assets, Joe, about $4.6 million.

Joe: Okay.

Al: And in of that, deferred is $1.7 million, taxable is about two and a half million, tax-free, call it $400,000.

So that’s what makes that up. He said he had five something million but that includes his home- Okay … as well.

Joe: Okay.

Al: Which may be okay ‘Cause he’s gonna sell … since he’s planning on selling it. Yeah. Yeah. But just go with the current liquid assets. And something that’s missing here is how old his wife is.

Joe: 40…

Al: she wants to retire at 47, but there’s no mention of-

Joe: Her age … her age now.

Andi: It doesn’t say how old she is now, yeah.

Al: Now.

Joe: Wife wants to retire at 47, I’m 52. That’s- I’m guessing that-

Al: That’s how I took it too. Yeah. I’m guessing she’s 47.

Joe: Yep.

Al: So if that were the case, so y- you kinda look at the distribution rate.

if they wanna spend, call it $120,000 to $150,000, divided into about $4.6 million of assets, that’s a distribution rate at 2.6% to 3.3. Joe, I’m good with that. I think, this works, and that’s before considering the home as an extra asset or Social Security. So I, yeah, I think this looks pretty good as far as their ability to do it

Joe: I am, just trying to see how they accumulated this wealth.

So they got 401(k)s of 1.7 million.

Al: Yep.

Joe: But he said his solo 401(k), by the time he’s 60, will be 325,000. So that’s in eight years.

So is he using a hypothetical rate of return?

Al: I don’t know what he’s using, but I didn’t even go there because I think it works right now today.

Joe: Yeah, but I’m trying to think…

Y- you’re just thinking of the numbers. I’m thinking of something a little bit differently- Yeah … here.

Al: I got more too, but, yeah, y- okay, you take it from here.

Joe: But I’m just trying to think of how they accumulated $5 million, because he’s a stay-at-home dad, and his Social Security, and he’s got 100, let’s call it maybe a couple hundred thousand dollars in a 401(k).

So they got $2.5 million in a taxable account. She makes $220,000 a year. She’s 47 years old, and she’s got, she’s saved $1.5 million in a 401(k) plan.

Al: 1.7.

Joe: And plus another $425,000 in a Roth. Yeah. I’m guessing the Roth is hers, the rest of the 401(k)’s hers, and the taxable is, combined.

Al: Could be. Yeah. It’s,

Joe: They live in, where do they live?

Texas?

Al: Yeah, Texas.

Joe: What do you think she does? Works for the oil companies. She got a lot of stock from Shell, Exxon.

and- You think there was an inheritance somewhere along the way?

Al: So I’m gonna guess-

Joe: Okay …

Al: one of two things. An inheritance, or she worked for a tech company maybe in Austin and got some stock options, restricted stock, something like that.

Joe: Could be the oil companies, too, with the RSUs.

Al: Could be. I don’t… Do they pay… I’m not sure they pay out as much as a tech company, but, Sure … yeah, it does- I agree with you. The numbers don’t quite, they’re not quite logical. We’re missing something here. ‘

Joe: Cause he didn’t, like, they had dual…

Because it’s a ton of cash for someone their ages.

Al: Yeah. Now- The- … may- maybe he was working-

Joe: And they just saved a ton of money- Maybe … like, in their 20s …

Al: and maybe they didn’t spend very much, but now they got this money and wanna spend more. I don’t know. They, yeah.

Joe: But the reason why I ask is, basically, th- as, as you accumulate wealth, you know, there’s certain strategies, there’s certain discipline, there’s certain, you know, things that you need to, do, right?

From a financial perspective. So if they just set it and forget it and- you know, saved, and maybe they got a little inheritance and, you know- Yeah … they were grinding. But, and he plays, he does the stock market- which makes me a little bit nervous.

Al: Me too.

Joe: Because as you now start taking money from the overall portfolio, it’s a little bit different.

It gets, in my opinion, a little bit more complex doing this for over 25 years- just because of, A, all right, yeah, where do you pull the money from? He likes these dividends, but are they qualified dividends or non-qualified dividends? How are they gonna be taxed? Are you doing any tax strategy with this $2.5 million?

Or is he just trading? Is there short-term gains coming on account, you know, on the tax return-

Al: Yeah …

Joe: that is creating ordinary income that doesn’t necessarily need to be there?

Al: Sure.

Joe: So even though he’s playing, or he does the stock market- Yeah … which is great if he enjoys that, I would just be a little bit careful now because he’s not gonna go back to work, and this $5 million has to last them anywhere from, I don’t know, call it 10 to 50 years.

Al: Let’s say 35 to 40. But yeah,

Joe: Because if they inherited a bunch of it, it’s like, all right, did they have the discipline to save it? If they had the discipline to save it, then they probably had the discipline to kind of, you know, follow the, the strategy- throughout given volatile markets is kind of where my head was going.

Al: Got it. Yep. the, the o- the, the thing that does make me nervous about this is when he says he does the stock market, because we’ve had, what do you… let’s call it a 15-year bull market run. I mean, there’s been a couple little downs here and there, but for the most part, 15-year bull market. Which basically means when you’re doing the stock market in a great market, you do well.

And but the market doesn’t always do well, Joe, and people can lose a lot of money doing that. So I just, I don’t know what doing the stock market means, but I do know of friends of mine that did the stock market in 2004, 2005, 2006, making all this money. Look how smart I am. And then 2007 hit, the Great Recession, and then the stock market went down about 50%.

So it does- it’s not always there.

Joe: Yeah, but I… if he’s, like, buying the entire market and he’s diversified, then keep doing the market. But if he’s taking big bets-

Al: I’m thinking- …

Joe: I think you make big bets when you’re 50, but you wanna work another 10 years.

Al: Yeah. I, I-

Joe: I don’t know if you make big bets when you’re 50 and you wanna retire tomorrow.

Al: I think reading between the lines, doing the stock market means- Making your bets … you’re making some bets.

Joe: You’re making a couple of bets there?

Al: I think so. And they probably paid off so far.

Joe: dude, it, the… I mean, they’re sitting really good. I mean, they could sit in cash almost and be fine.

Al: yeah. Agreed.

Joe: I… that’d be boring. Because what do they need? They need probably a 4% rate of return, because they’re gonna pull 3%.

Al: Yeah. And that’s, like I say, that’s before fixed income, Social Security. That’s before extra assets from their home.

you know, the, some of the other thoughts.

Should they do a 72(t)?

Joe: I don’t think they need to.

Al: Yeah, I don’t-

Joe: I would be doing conversions like mad.

Al: Same.

Joe: Same. I- I’d be living off of the, the taxable account-

Al: Yeah …

Joe: to get my $125,000 of income. but, I mean- And then do conversions. But I would imagine, she- so she wants to do non-profit work it sounds like.

Help a-

Al: Yeah. Sure …

Joe: a volunteer doing the non-profit work, so she’ll be busy. Yeah. He’s gonna be doing the markets, and then they got still young kids.

Al: Yep.

Joe: Yeah, I would live off the non-qual. I would do Roth conversions. I don’t think they need to do a 72(t)at all. Yeah. They have enough capital there. But if need be, like a 72(t)kinda locks you up for five years or, until you turn 59 and a half.

Al: Yeah.

Joe: You don’t get a ton of money out of it anyway. They got 1.7. I’d be doing conversions. By the time I would need a 72(t)- I don’t know what the, the income would look like. Yeah. So you’d have to take the same amount of money out for five years or 59 and a half.

Al: Yeah.

Joe: So-

Al: And assuming that she would do it, so she’d be 47, so it’d be 12 years locked into a payment.

Joe: Or, he was saying me- and he’ll have $300,000 when he turns 60, so, and she’s still, you know, four or five years away from that.

yeah, the numbers work. It, then it’s just now the strategy from a planning perspective. Do the market, that’s fine, but I think what I would do is a little bit more strategy on how the overall picture works.

How are you gonna create the income? What tax, implications are you thinking of? How are you gonna draw it from a, tax and inflation? and then from there, then figure out what target rate of return that you need. And then you can bucket the money up and say, “You know what? I’m gonna take big bets with this.

This is going to be, you know, my more conservative-type portfolio.”

And then if you do it that way, I think y- you’d be able to sleep at night when the market turns and when you hit a, a bear market for a couple years.

Al: Yeah. I like that a lot. but I, would say, everything Michael said o- on paper sounds good.

I mean, there’s… It’s a good plan. That was the question. Is this-

Joe: You ever work with a consultant?

Al: Is this a good plan?

Joe: You know? Have you ever seen PowerPoints? They look really good on paper- I know … until you try to implement. I’m

Al: saying from this fact pattern, I like it.

Joe: Oh. I like it too. I like it too. all right. Congratulations- Michael from Texas. Yeah.

Andi: Does your retirement spending plan line up with what you’ve actually saved? That’s assumption number two in this week’s brand new episode of the Your Money, Your Wealth® TV show, where Joe and Big Al break down the ten wrong assumptions pre-retirees make before the biggest financial transition of their lives. The fellas get into everything from thinking you’ll work as long as you want, to underestimating taxes, to counting on Medicare to cover it all. The link to watch it is right in the description of the podcast episode you are watching or listening to right now. And our most popular guide, the Retirement Readiness Guide, is available for right there in the episode description too. Download it for free to learn how to create income that lasts, when to claim Social Security, how to plan for healthcare costs, and getting your tax plan right, so you can line all of it up before you pick a retirement date. Jump into the episode description to watch the YMYW TV show and download the Retirement Readiness Guide. And then do a friend a favor and tell them about us, too.

$3M Saved, $640K Income: Can We Retire at 50? (Homer & Marge, Northern California)

Joe: All right, here we go. We’re gonna go to, Homer and Marge from North Carolina.

Al: Okay.

Joe: “We have two kids, Lisa and Bart, 14 and 8.” “Marge would like to retire anywhere between 50 and 55, and I’m fine working till 59 and a half. Lisa currently has $200,000 in her 529, Bart has 120.

The goal is to get 250 each because it’s likely they’ll be going to school out of state. And we have friends with kids at Penn State, Clemson, Oregon, et cetera, and they all say it’s roughly $65,000 a year. Marge and I, we’re W-2’d. We make $640,000 a year.” That was in 2025 anyway. “However, we are in sales and that can fluctuate, as well as our job security.

We currently have $3 million in pre-tax retirement, roughly 100,000 in brokerage and 100,000 in cash.” See, now this is a normal fact pattern.

Al: It is, ’cause you know they saved it themselves .

Joe: They make $640,000 a year. They have two kids roughly the same ages as Michael.

Al: Yep, yep. Agreed.

Joe: And they got $3 million in retirement accounts, so they’ve been jamming…

You know, the, most of their savings are in retirement accounts because it’s, all right, we get the match, we’re gonna save, it’s a little bit easier to do. And then they got 100,000 in a brokerage.

Al: yeah. But-

Joe: Mike from Texas has got $2.5 million in a brokerage account.

Al: Yeah. Now, there was a third alternative.

Maybe he’s done really well doing the stock market.

Joe: He does the market well, man. He does the… I’m gonna give him my cash.

Al: Yeah.

Joe: All right. They got 100,000 in brokerage, 100,000 in cash. “We also have $200,000 invested with a hedge fund that’s gonna turn into $2.5 million, and the manager’s named Michael from Texas.”

Al: That could be

Joe: I made that up. All right. “We have $200,000 invested with a hedge fund that will be exiting a deal in 2026 that will provide us enough to pay off the remaining $720,000 mortgage- Yeah … on our home.”

Al: Yeah. Nice.

Joe: All right. So the $200,000 hed- hedge fund turned into over $720,000.

Al: at least $720,000.

All right. Yep.

Joe: You go Homer and Marge. Okay, “The home is valued at $2.5 million. There will be additional payouts in years to come that will be smaller. We have no other debt. I drive a 2020 Ram I’ll be driving into the ground, and my wife drives a 2023 Highlander. She’ll be driving that into the ground. Both were purchased used. I enjoy Russian River and Sierra Nevada’s IPAs. My wife loves Pinot Nyore.”

Andi/Al: Noir.

Joe: We would like to- Noir. Pinot. “We would like to be able to spend 20 to $25,000 a month in today- today’s dollars in retirement, and she’d receive about 750- $7500 a month Social Security. We have no pensions coming our way. Would love a little spitball. Love the show. Thank you.” Cool. Thank you.

Al: Okay.

Joe: Let’s go.

Al: they’ve got, about $3,400,000, maybe more than that. Maybe the hedge fund is more than $200,000.

Joe: Let’s call it a million.

Al: Yeah, maybe. So maybe they’re closer to $4 million or, above, right? h- here-

Joe: But l- I would just get rid of the 200,000 hedge fund all together, ’cause that’s just gonna pay off the mortgage.

Al: Yeah, I suppose. For the liquid assets.

Joe: Right?

Al: Good point. Good point. Yeah. So here’s what we know, Joe. Th- she wants to retire, at 50- 50 to 55 … 50 to 55, and he’s fine working to 59 and a half, which is a great fact, but I don’t know how old they are.

I know.

So it’s another one, I don’t have the facts here.

Joe: Oh, see,

Al: so- So, so here’s what I did.

Joe: You’ve got a 14-year-old and an 8-year-old.

Al: yeah.

Joe: And we got-

Andi: They’re probably like mid-40s, right?

Joe: Yeah. I don’t know.

Al: So I just said, okay, those are pretty big numbers, 20 to $25,000 a month in spending.

Joe: Okay.

Al: So I just said, okay, what if they retire right now? What’s the distribution rate? And it’s 7.1 to 8.8%.

Joe: So they want $300,000 a year.

Al: yeah. And if y- if you take $300,000 divided by, let’s just say 3.5% distribution rate, they need about $8.5 million.

S- and they’re at-

Joe: Three and a half …

Al: three and a half. Yep.

So I don’t know how much longer they’re working, but that’s a… You know, it’s great to have all this money, but the spending has to be in the right relationship with the money you got, otherwise it makes it kinda tricky.

Joe: Yeah. Yeah, that’s a good way to look at it. It’s like, I don’t know, yeah, three and a half, four per- I use four and it’s seven and a half million.

Al: yeah. So, and I use, and I did 240 gross setup. I get 6.8 to 8.6. So yeah, we’re in there, roughly what they need. But that’s a little skewed too, Joe, ’cause I didn’t, I don’t know how long they’re gonna be investing, so I just did today’s dollars. I didn’t even inflate it. So anyway, it’s, yeah. W- but we do need to know their age to know whether this works or not.

Joe: Yeah.

Al: Like, if they have 10 years to go or 15 years to go and they’re saving a ton, okay, I could work with that. But if they, if they’re working three more years and they’re done, it’s, looks a little tight.

Joe: Yep Yes. but, I mean, they’re on a good path

Al: They’re on a great path, yeah

Joe: But yeah, it was a nice story. But we didn’t really get to-

Al: You know, I was right there on the Russian River with them.

Joe: I know.

Al: Yeah.

Joe: I felt the Russian River. I saw you canoeing.

Al: Yeah, and you could imagine me going right into the bushes.

Joe: Yeah, yes. guaranteed you were wearing a helmet.

Al: I was not. Got a little scratched up, but that’s all right.

Joe: Okay. yeah. So we need a little bit more. There’s math. Th- this is all math.

Al: Yeah, if you don’t wanna tell us your age, then just tell us how many more years till retirement, and we can calculate that, how much you’re saving, right?

How much you got currently. Then we can put in a interest rate and-

Joe: We can make it up

Al: … a number of years.

Joe: But yeah, $3,5 million, go for it. Go.

Al: i- if they wanna, if they, let’s say they wanna retire today at $3,5 million, what could they spend?

Joe: $3,5 million, I would-

Al: If you-

Joe: If you gotta bridge the gap to Social Security, I would still say they could spend 150 grand.

Al: Yeah, I don’t disagree. Because they’ve got good Social Security coming in. But not 240 to 300.

Joe: no. 150. And so-

Al: And that might be, kind of on the edge.

Joe: Yeah.

Al: I, like-

Joe: But there’s gonna be added payments with the hedge fund.

Al: yeah, that’s true.

Joe: So there could be more dollars coming in.

Al: There could be- And maybe the spending’s down when they pay off the mortgage. Yeah. I, you know, I don’t know.

Joe: I know they’re high-powered salespeople.

Al: Yeah.

Joe: 650, that’s pretty type A personalities.

Al: yep,

Joe: Yeah. It’s hard to retire early, so maybe they go sell something else that’s not full-time that makes a couple of bucks.

So I don’t know. I think they’re sitting in really good shape. But yeah, it’s like w- we need to know certain dates and timeframes and-

Al: Yeah …

Joe: it’s just, it’s math. Yeah. If you don’t have-

Al: It’s math, yep …

Joe: it’s hard to solve the equation without a number. Okay.

Pension + $1.45M: Can I Retire at 58 and Spend $11K a Month? (Seth, North Central IL)

Joe: All right, let’s go to Seth from Illinois. “Drink of choice, Diet Pepsi for me and the wife loves some water.” Love to hang out with Seth. Just slamming Diet Pepsis. He’s looking for a spitball.

Al: next time you’re, Illinois, maybe shoot by.

Joe: Yeah, we got an office in,

Al: Yeah

Joe: … Northbrook and Wheaton.

Al: We do.

Joe: Two offices there Just booming Midwest-

Al: There we are

Joe: financial planning firms.

Al: Yep,

Joe: husband age 53 and a half, wife age 55. Combined income of $120,000, 110 base salary and $10,000 annual bonus, living in North Central Illinois. Yeah. Nest egg, $1.5 million, of which $80,000 is a Roth and $1.4 million is in pre-tax. Husband has a pension with no COLA, which will be $43,000 starting at age 58, $48,000 at 59, $52,000 at 60.

This figure is 100% survivor to the wife. Social Security at age 62 is $2300 a month, or tw- or $3300. wife is gonna be 13, then 18. Wife is retired. Are we on track to spend $11,000 a month after tax, starting at husband’s age 58? I don’t know who’s writing this because they switch back and forth so many times- They do

the husband, wife, husband They do.

Andi: considering that it says that it’s from Seth from Illinois, I’m guessing that Seth is the husband

Joe: Do you ever refer to yourself to husband?

Al: No. How about you?

Joe: No.

Al: do, like you walk in at night-

Joe: The hus- “The husband’s here” … “So, hey, the husband has co- has spoken.”

Yeah. leaning towards wife withdrawing Social Security at 62 and husband at 65 due to family history. Okay, we have retirement healthcare plan that allows us to stay on the company’s group healthcare till 65, and when we convert to Medicare, we receive an additional retirement benefit that currently pays for 10 to 12 months of the supplement premiums.

Yes, an awesome benefit, I know. Is that it? Okay.

Al: That’s it.

Joe: Can he spend $11,000 a month on $1.5 million with his pension and Social Security? I’m gonna take a stab here and say he’s gonna be pretty close.

Al: Yeah, he’s pretty close. It’s a little tight, but pretty close. So, so here’s the math I did. Starting at about $1.5 million.

Joe: When does he wanna retire, 55?

Al: at 58. So five years from now.

Joe: Oh, okay.

Al: Yeah, so five years from now, he doesn’t say what he’s saving, but I’m just, I threw in 10 grand. Maybe it’s more, but I threw in 10 grand.

Joe: Okay.

Al: 6%, that’s two million, so that’s what they end up with in five years. Sure. And the spending, 11,000 a month, that’s 132,000.

3% inflation, five years, that’s 153. So if I take 153 spend and I subtract the, pension- Pension … at that point, 48, b- before Social Security-

Joe: Okay

Al: … I get a shortfall of 105, and then the distribution rate there is 5.3.

If I t- if wife takes Social Security, now I’m saying wife. If wife takes Social Security at 62, it’s a distri- That’s wife.

Yeah, it’s a distribution rate of 4.5%, and that’s before his. It’s tight, but it’s pretty close.

Joe: yeah.

Al: I mean, if, it were me, Joe, I, and I wanted to retire at 58, I would. I might try to curb the spending a little bit, maybe 10 grand, which then would put him at a distribution rate of 4% with wife’s Social Security.

That’s probably, what I would do. You?

Joe: I wonder if husband likes that answer.

Al: I think husband, he’s okay with that, but wife isn’t.

Joe: Yeah, it’s tight. but the fixed income is gonna be rich.

Al: It is, yeah.

So-

Joe: Yeah, and that, that pretty much covers it, it, yeah, if that burn rate is a little bit high-

Al: That’s what I’m thinking

Joe: and they dip into their liquid assets a little bit more than they probably should, you know, they’re still going to have a pretty comfortable lifestyle with the pension and Social Security as, Agree … Social Security. If he pushes his to 70, Yeah

Al: I would have her, I’d have, she should probably take it at 62, and then he should probably wait until as long as he can.

Joe: Is, yep, yep, yep. I was just gonna say that.

Al: yep.

Joe: Okay. cool. Very good. Wonderful health benefit.

Al: Yep.

Andi: How much you pull out each year in retirement compared to what you’ve saved is what decides whether your plan holds up or completely falls apart. That withdrawal rate is absolutely key. Download our free Withdrawal Strategy Guide to see how the math works for your own situation. It breaks down the common ways to structure withdrawals, it’s shows the odds of success at different distribution rates, and it walks you through how sequencing which accounts you tap first can help lower the taxes you pay over the long run. It’s a free download, and the link is right in the episode description. Choose “podcast” in the “how did you hear about us” dropdown when you get yours.

Can We Stop Saving Now at 42 and 45 and Still Retire at 55? (Shua, Phoenix, AZ)

Joe: We got Shua. Sha.

Andi: Shua. And he explains at the end- Shua … so keep reading.

Joe: All right, Phoenix, Arizona. “Spitball please. Can we coast, no more contributions, to the retirement age of 55 to 58? Currently 42 and 45.

Tax-deferred is $564,000, contributing $1200 a month. Tax-free is $335,000, contributing $1250 a month. HSA, I treat this as a retirement account, $31,000, contributing $729 a month. Taxable, $34,000, contributing $900 a month.” One, two, three, four, so they’re saving roughly $50,000 a year.

Al: Yeah.

Joe: $100,000, or 100% equities, “But we would like to start to transition to a 70/30 in a few more years.

We are projected to receive $5000 a month Social Security at age 67. We also expect our spending needs to drop by $30,000 at age 65 when Medicare kicks in. No debt. House paid off. We would like to have our annual spending ability after taxes 170 in future dollars.”

Al: Yep.

Joe: They already adjusted it for inflation for you.

Al: Ap- apparently, yep.

Joe: “Living somewhere out West, most likely Arizona. Moscow mule was my drink back in the day, but now it’s water and black coffee.”

Al: Okay.

Joe: “My name is Shua, like Joshua.”

Al: Joshua. Oh, there you go. Now we know how to spell it.

Joe: That’ll go on four letters. Thank you.

Al: Shua.

Joe: Shua.

Al: Okay, got it.

Joe: Joshua.

Al: Got it.

Okay.

Joe: Joshua.

Al: I think you can do the math in your head on this one.

Joe: WarGames. Remember WarGames? That’s what I think of when I hear Joshua.

Al: Joshua? Okay.

Andi: Okay.

Joe: And we play a game.

Al: So-

Joe: You know what I’m talking about, Aaron. Nope. You know who Joshua was? It was the… That was AI.

Andi: How old is this movie that you’re talking about?

Joe: That was the Matthew Broderick. Yeah. That was AI back in, let me, I’m guessing 1987. That was a while ago.

Al: So e- even I saw that movie, and even I know Matthew Broderick was in it. Yeah. But I didn’t remember Joshua.

Joe: That was the name of the computer.

Al: Yeah, okay. I know HAL.

Andi: WarGames was 1983.

Joe: Oh, ’83, wow. That was 19, that was-

Al: You were in kindergarten

Joe: less than that.

Andi: Oh, Ally Sheedy was in it as well.

Joe: Yeah, that was the girlfriend. They were running around. Wow. It was in, yeah, the Pacific Northwest.

Al: let’s just do a little back of the envelope math, Joe. With, if they stop all their contributions-

Joe: Yep …

Al: their portfolio will double probably-

Joe: Yep

Al: by the time they retire, so let’s call it two million.

Joe: Sure.

Al: If they’re spending 170-

Joe: Doesn’t work

Al: that’s a 8.5% distribution rate. That’s not even close

Joe: Yeah. What’s he thinking?

Al: So to spend $170 in future dollars-

Joe: 170. What, how old is he at one s- 60, 65? When does he wanna retire?

Al: I got 13 years.

That’s 55, I guess. What did I think? 55

I don’t know. I don’t know where I got that. Oh, yeah, it’s right at the top. I, wanna retire at age 55. Can we coast? No more contributions.

Joe: Oh.

Al: And the answer is no.

Joe: 55 and 58, yeah.

Al: Yeah.

Joe: No.

Al: No, not even close. Yeah, so if, you wanna spend 170, Joe, you got the calculator.

Joe: No.

Al: At eight, so you probably divide it by-

Joe: 5.6

Al: 3% or 3.5%.

Joe: 3% is 5.6 million.

Al: So they have two.

Joe: So how much does he need to save? So you, got a million dollars today. You got 15 years until-

Al: Yeah …

Joe: right? Or is that less than that?

Al: That’s 13.

Joe: 13 years?

Al: Yep.

Joe: All right. I’m gonna be generous and give you 7%.

Al: Yep.

Joe: And we need 5 million.

Oops, that’s 77%. I don’t know.

Al: So I did the same math. I got, I th- I got they, they needed about 4.8 million. They would need to save about 125,000 a year at 7% to get to that number. So you’d be get roughly the same thing

Joe: I got, what? I have 65,000 a year.

Al: 65?

Nah, try that again.

Joe: Yeah, that’s probably right. So they got a mil- well, you already did the math. Why do I have to do the math?

Al: you already started. Oh. But let-

Joe: Okay. I don’t…

Al: So I got you start at 933 at 13 years to get to 4.8 million. At 7%, I get 127.

You’re not starting at two million, you’re starting at-

Joe: yeah, I got one- 120.

Al: Yeah, So 120, 125. Yeah. Some- something like that.

Joe: Yeah.

Al: So, no, you can’t coast. If that’s the question.

Joe: No, sir. No more coasting, Shua

Al: You know, but that brings up a good point though. Remember, I mean, for so many years the goal was to reach a million dollars, and the thought was, “Once I reach a million dollars, I’ll be fine.”

And that’s, it all depends upon your spending. It goes back to that.

Joe: Yeah. inflation.

Al: Yeah.

Joe: you’re s- people are spending a lot more. Yeah. How many thousand, a million dollars- Yeah … is just not gonna carry you. That’s-

Al: Not really. that’s like 40 grand of income.

Joe: And you wanna spend a little bit more than that.

Al: Yeah, 170.

Joe: That’s, But with the amount of mo- he’s saving a ton of money, $50,000 a year roughly.

Al: Yeah.

Joe: So it’s, 55 is not gonna do it. I would say closer to 60 could get there.

Al: Could get there, maybe even a little bit longer at this spending. Now, you can always reduce your spending or you can do part-time work. There’s a million ways to do this, so-

Joe: The house is paid off.

There’s no debt, no- nothing. Yeah. you gotta bridge the gap to Social Security. At 55 to 70-

or 67, he’s gonna reduce his salary by 30,000. what did you say his burn rate was gonna be at 55?

Al: At, at 55, I-

Joe: 8%?

Al: Yeah. Eight and a half. Eight and a half.

Joe: If it was 5%, I would say he’s close, but not at eight.

Al: Yeah, because Social Security’s cut.

Joe: Because Social Security and then plus he’s gonna reduce his living expenses by $30,000 because of private Medicare.

Al: True.

Joe: Medical.

Al: yeah. True.

Joe: I’m, fine with the five. So he’s closer than maybe we’re giving him credit for. Maybe he doesn’t need the 5 million. Maybe- Maybe not

he gets something closer to three. If he doubles that until he’s saving 50,000 a year, you got 15 years.

Al: He could be, he could be three and a half maybe. Yeah. And maybe it’s okay.

Joe: And it depends on what… He’s 100% equities now. Let’s say if he had the same market the last 15 years for the next 15 years- Yeah

I think he’d be right there.

Al: I agree with that. Yeah. But you can’t count on it.

Joe: I know. Exactly. Let’s do that. but here’s a good thing, is that he’s already got the foundation. He’s in a phenomenal spot. He’s disciplined right now to save, but he’s thinking, “Man, can I just coast on the contributions? I wanna s- save a little bit more, or, I mean, probably spend a little bit more money.”

Al: yeah. I think he’s trying to get up to the 170 spend right, r- right now, or in current dollars right now maybe.

Joe: it’s close. You would wanna run a couple more scenarios, but just a spitball back of the envelope, it’s, depends on how aggressive you wanna be with your assumptions.

We’re pretty conservative with our assumptions.

We are. I agree. If you wanna be aggressive with your assumptions-

Al: yeah …

Joe: then you’re golden. Use a 2% inflation rate. Use a 10% growth rate on your money.

Al: Yeah, or 11, whatever.

Joe: Sure. And I think you’re gonna be just fine by coasting.

Al: Yeah, so I guess, you know, this one you hardly have to do the math.

I mean, the, I, I guess the way I think about it is if it, at 7%, without adding any contributions, your money’s gonna double in 10 years roughly, right? So you got a million today, it’ll be two million in roughly 10 years from now, and so now you got two million, and what can you spend on that? at 55 you might only wanna spend 3% or 3.5%, but, what you said, Joe, is correct and that is if your spending is gonna go down, number one, and number two is you’re gonna have fixed income later.

That has to be factored in. So, so maybe it’s a 3.5% distribution rate.

Joe: So-

Al: Maybe even 4%. May-

Joe: So a million dollars at $50,000 payment, he’s got… I’m gonna give him 15 years.

Al: Okay.

Joe: And I’m gonna go 7.5%.

Al: Okay.

Joe: And he’s gonna have $4.2 million. And that’s

Al: pr- that’s getting pretty close.

Joe: 4.2, 4%, that’s 170.

Al: Yeah. There you go.

and then less expenses and more income coming in later.

Joe: But he wants to coast. He doesn’t wanna save anymore. Yeah. So that million dollars goes to two million.

Al: It’s not enough.

Joe: It’s not enough. Yeah. Even if he takes 5%, you know, it’s $100,000. He wants 170. He’s gotta bridge that gap- so now he’s gonna take a lot more money out. It’s just too risky. If he continues to save the way he’s saving, I think he’s gonna be in really good shape.

Al: Yeah. I think so, too. And then even at 55, you might wanna do part-time work just to, you know, preserve the portfolio. You don’t have to. It depends upon what the market does.

Joe: Depends. Yeah.

Or maybe work at a job that gives you a little bit of health insurance.

Al: Yeah. Good point, right? ‘Cause you’re spending 30,000 a year. $30,000 a year on that. Yeah. Yep.

Joe: Lot of levers to pull.

Al: Yep. For sure.

Joe: Anything else, Andi?

Andi: I think that about covers it.

Joe: That about covers it. All right. Thanks for listening.

Once again, folks, keep the questions coming in. appreciate the listenership.

Al: Yes, for sure.

Joe: and we’ll see you next time. The show’s called Your Money, Your Wealth.

Outro: Next Week on the YMYW Podcast

Andi: Next week on YMYW, Gord, Carrie, Archie, and Veronica are all trying to figure out whether to pour their money into a home or keep building for retirement, and Joe and Big Al break down the timing. Tune in before you touch a dollar to see where they land. If you’re looking at your own numbers wondering whether early retirement is real for you or just wishful thinking, don’t guess. Click the link in the episode description to sign up for a free financial assessment with the experienced professionals on Joe and Big Al’s team at Pure Financial Advisors. They’ll look at your income, your spending, your investments, and your taxes, and show you what your plan can actually support. It’s free, there’s no obligation, and it beats finding out the hard way that you were never as close as you thought. Click the link in the episode description to schedule your Free Financial Assessment now, either at one of our 13 offices around the country or in person via Zoom. 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: Big Al Canoeing on the Russian River

Joe: Russian River. Have you ever had a little Russian River, Al?

Al: I’ve been on the Russian River in a canoe.  I don’t think I’ve had Russian River beer.

Joe: Got it. Sierra Nevada. Sierra Nevada’s Old Chico Wheat.

Al: No.

Joe: A lot of them.

Al: A lot. Okay.

Joe: Very good.

Andi: Here’s the Russian River

Al: Oh, there we go. I don’t think I’ve had that one.

Joe: Nope. Didn’t see it anyhow.

Al: And I was just up there, but I don’t think I saw that one.

Joe: Okay. Were you in Russia?

Al: No, I was in the Russian River.

Andi: On the Russian River, which is in California.

Al: In Sonoma County.

Joe: Got it. Is that the one where you took your wife out on, in the canoe?

Al: Yeah.

Joe: Is that… Okay.

Al: Yeah.

Joe: We talked about the Russian River before.

Al: We did. Okay. We have, yeah.

Joe: I think that’s your first date or something.

I w- Maybe you asked her to marry her on the Russian River … it was,

Al: it was, it was-

Joe: Early …

Al: early on.

Joe: Early in your-

Al: And I was showing her how good my canoeing skills were. Yeah. And I went really fast, like, like I’m gonna hit the bushes, and then I was gonna turn really fast. Turns out you can’t turn a canoe that fast.

Joe: Got it.

Al: We went right into the bushes. But she still likes me.

Joe: All right. There you go. how many years later?

Al: Oh my gosh, that would’ve been probably 30, le- almost 40 years ago.

Joe: Wow.

Andi: She did not marry you- 40 … for your canoeing skills.

Al: No, but I did canoe recently on L- Lake Louise in Canada, and I did just fine.

Joe: You were, oh-

Al: No bushes in the way.

Joe: … you still got the skills.

Al: I didn’t do a big rush to the shore and then try to turn it.

Joe: Got it.

_______

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